Correlation Between Amazon and S A P
Can any of the company-specific risk be diversified away by investing in both Amazon and S A P 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 Amazon and S A P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and SAP SE, you can compare the effects of market volatilities on Amazon and S A P 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 Amazon with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and S A P.
Diversification Opportunities for Amazon and S A P
Very poor diversification
The 3 months correlation between Amazon and SAP is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and Amazon 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 Amazon Inc are associated (or correlated) with S A P. 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 Amazon i.e., Amazon and S A P go up and down completely randomly.
Pair Corralation between Amazon and S A P
Assuming the 90 days trading horizon Amazon is expected to generate 1.51 times less return on investment than S A P. In addition to that, Amazon is 1.15 times more volatile than SAP SE. It trades about 0.06 of its total potential returns per unit of risk. SAP SE is currently generating about 0.11 per unit of volatility. If you would invest 17,192 in SAP SE on August 25, 2024 and sell it today you would earn a total of 5,423 from holding SAP SE or generate 31.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. SAP SE
Performance |
| Timeline |
| Amazon Inc |
| SAP SE |
Amazon and S A P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and S A P
The main advantage of trading using opposite Amazon and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, S A P 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 S A P will offset losses from the drop in S A P's long position.| Amazon vs. ANTA SPORTS PRODUCT | Amazon vs. Ubisoft Entertainment SA | Amazon vs. BE Semiconductor Industries | Amazon vs. Magnachip Semiconductor |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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