Correlation Between SAP SE and Block

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Can any of the company-specific risk be diversified away by investing in both SAP SE and Block at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SAP SE and Block into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and Block Inc, you can compare the effects of market volatilities on SAP SE and Block and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SAP SE with a short position of Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAP SE and Block.

Diversification Opportunities for SAP SE and Block

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between SAP and Block is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and SAP SE is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SAP SE are associated (or correlated) with Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Block Inc has no effect on the direction of SAP SE i.e., SAP SE and Block go up and down completely randomly.

Pair Corralation between SAP SE and Block

Assuming the 90 days horizon SAP SE is expected to generate 2.02 times less return on investment than Block. But when comparing it to its historical volatility, SAP SE is 1.76 times less risky than Block. It trades about 0.11 of its potential returns per unit of risk. Block Inc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,771  in Block Inc on December 29, 2023 and sell it today you would earn a total of  547.00  from holding Block Inc or generate 7.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

SAP SE  vs.  Block Inc

 Performance 
       Timeline  
SAP SE 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, SAP SE reported solid returns over the last few months and may actually be approaching a breakup point.
Block Inc 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Block may actually be approaching a critical reversion point that can send shares even higher in April 2024.

SAP SE and Block Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SAP SE and Block

The main advantage of trading using opposite SAP SE and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAP SE position performs unexpectedly, Block can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Block will offset losses from the drop in Block's long position.
The idea behind SAP SE and Block Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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