Correlation Between S A P and DocuSign

Can any of the company-specific risk be diversified away by investing in both S A P and DocuSign 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 S A P and DocuSign into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SAP SE ADR and DocuSign, you can compare the effects of market volatilities on S A P and DocuSign 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 S A P with a short position of DocuSign. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and DocuSign.

Diversification Opportunities for S A P and DocuSign

-0.14

Correlation Coefficient

S A P  DocuSign

Good diversification

The 3 months correlation between SAP and DocuSign is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and DocuSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DocuSign and S A P 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 ADR are associated (or correlated) with DocuSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DocuSign has no effect on the direction of S A P i.e., S A P and DocuSign go up and down completely randomly.

Pair Corralation between S A P and DocuSign

Considering the 90-day investment horizon SAP SE ADR is expected to generate 0.47 times more return on investment than DocuSign. However, SAP SE ADR is 2.11 times less risky than DocuSign. It trades about 0.1 of its potential returns per unit of risk. DocuSign is currently generating about 0.02 per unit of risk. If you would invest  8,924  in SAP SE ADR on January 21, 2024 and sell it today you would earn a total of  8,653  from holding SAP SE ADR or generate 96.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SAP SE ADR  vs.  DocuSign

SAP SE ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in May 2024.

DocuSign

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DocuSign has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with S A P and DocuSign

The main advantage of trading using opposite S A P and DocuSign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, DocuSign 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 DocuSign will offset losses from the drop in DocuSign's long position.

The idea behind SAP SE ADR and DocuSign 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.