Correlation Between S A P and New York
Can any of the company-specific risk be diversified away by investing in both S A P and New York 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 New York into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and The New York, you can compare the effects of market volatilities on S A P and New York 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 New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and New York.
Diversification Opportunities for S A P and New York
Poor diversification
The 3 months correlation between SAP and New is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and The New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York has no effect on the direction of S A P i.e., S A P and New York go up and down completely randomly.
Pair Corralation between S A P and New York
Assuming the 90 days trading horizon S A P is expected to generate 2.8 times less return on investment than New York. But when comparing it to its historical volatility, SAP SE is 1.88 times less risky than New York. It trades about 0.03 of its potential returns per unit of risk. The New York is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,120 in The New York on August 29, 2024 and sell it today you would earn a total of 106.00 from holding The New York or generate 2.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. The New York
Performance |
| Timeline |
| SAP SE |
| New York |
S A P and New York Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and New York
The main advantage of trading using opposite S A P and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, New York 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 New York will offset losses from the drop in New York's long position.The idea behind SAP SE and The New York 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.| New York vs. MAGNUM MINING EXP | New York vs. SBM OFFSHORE | New York vs. MCEWEN MINING INC | New York vs. RYU Apparel |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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