Correlation Between S A P and SAP SE
Can any of the company-specific risk be diversified away by investing in both S A P and SAP SE 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 SAP SE 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 SAP SE, you can compare the effects of market volatilities on S A P and SAP SE 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 SAP SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and SAP SE.
Diversification Opportunities for S A P and SAP SE
No risk reduction
The 3 months correlation between SAP and SAP is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 SAP SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of S A P i.e., S A P and SAP SE go up and down completely randomly.
Pair Corralation between S A P and SAP SE
Considering the 90-day investment horizon S A P is expected to generate 1.27 times less return on investment than SAP SE. But when comparing it to its historical volatility, SAP SE ADR is 1.09 times less risky than SAP SE. It trades about 0.19 of its potential returns per unit of risk. SAP SE is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 17,463 in SAP SE on December 20, 2023 and sell it today you would earn a total of 1,285 from holding SAP SE or generate 7.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
SAP SE ADR vs. SAP SE
Performance |
Timeline |
SAP SE ADR |
SAP SE |
S A P and SAP SE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with S A P and SAP SE
The main advantage of trading using opposite S A P and SAP SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, SAP SE 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 SAP SE will offset losses from the drop in SAP SE's long position.S A P vs. Eventbrite Class A | S A P vs. Kingsoft Cloud HoldingsLtd | S A P vs. C3 Ai Inc | S A P vs. Daily Journal Corp |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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