Correlation Between S A P and Biogen
Can any of the company-specific risk be diversified away by investing in both S A P and Biogen 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 Biogen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and Biogen Inc, you can compare the effects of market volatilities on S A P and Biogen 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 Biogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Biogen.
Diversification Opportunities for S A P and Biogen
Pay attention - limited upside
The 3 months correlation between SAP and Biogen is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc 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 are associated (or correlated) with Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of S A P i.e., S A P and Biogen go up and down completely randomly.
Pair Corralation between S A P and Biogen
Assuming the 90 days trading horizon SAP SE is expected to generate 0.8 times more return on investment than Biogen. However, SAP SE is 1.25 times less risky than Biogen. It trades about 0.1 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.29 per unit of risk. If you would invest 21,975 in SAP SE on August 25, 2024 and sell it today you would earn a total of 640.00 from holding SAP SE or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. Biogen Inc
Performance |
| Timeline |
| SAP SE |
| Biogen Inc |
S A P and Biogen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Biogen
The main advantage of trading using opposite S A P and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Biogen 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 Biogen will offset losses from the drop in Biogen's long position.The idea behind SAP SE and Biogen 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.| Biogen vs. EIDESVIK OFFSHORE NK | Biogen vs. Suntory Beverage Food | Biogen vs. GREENX METALS LTD | Biogen vs. Harmony Gold Mining |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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