Correlation Between S A P and Principal Financial
Can any of the company-specific risk be diversified away by investing in both S A P and Principal Financial 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 Principal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and Principal Financial Group, you can compare the effects of market volatilities on S A P and Principal Financial 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 Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Principal Financial.
Diversification Opportunities for S A P and Principal Financial
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SAP and Principal is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial 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 Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of S A P i.e., S A P and Principal Financial go up and down completely randomly.
Pair Corralation between S A P and Principal Financial
Assuming the 90 days trading horizon SAP SE is expected to generate 0.82 times more return on investment than Principal Financial. However, SAP SE is 1.21 times less risky than Principal Financial. It trades about 0.15 of its potential returns per unit of risk. Principal Financial Group is currently generating about 0.02 per unit of risk. If you would invest 10,458 in SAP SE on November 21, 2024 and sell it today you would earn a total of 17,122 from holding SAP SE or generate 163.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. Principal Financial Group
Performance |
| Timeline |
| SAP SE |
| Principal Financial |
S A P and Principal Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Principal Financial
The main advantage of trading using opposite S A P and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Principal Financial 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 Principal Financial will offset losses from the drop in Principal Financial's long position.| S A P vs. Ribbon Communications | S A P vs. Jupiter Fund Management | S A P vs. Q2M Managementberatung AG | S A P vs. Hellenic Telecommunications Organization |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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