Correlation Between S A P and Chevron
Can any of the company-specific risk be diversified away by investing in both S A P and Chevron 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 Chevron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and Chevron, you can compare the effects of market volatilities on S A P and Chevron 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 Chevron. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Chevron.
Diversification Opportunities for S A P and Chevron
Significant diversification
The 3 months correlation between SAP and Chevron is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron 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 Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of S A P i.e., S A P and Chevron go up and down completely randomly.
Pair Corralation between S A P and Chevron
Assuming the 90 days horizon SAP SE is expected to generate 0.74 times more return on investment than Chevron. However, SAP SE is 1.35 times less risky than Chevron. It trades about 0.19 of its potential returns per unit of risk. Chevron is currently generating about 0.04 per unit of risk. If you would invest 26,100 in SAP SE on November 28, 2024 and sell it today you would earn a total of 1,135 from holding SAP SE or generate 4.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SAP SE vs. Chevron
Performance |
| Timeline |
| SAP SE |
| Chevron |
S A P and Chevron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Chevron
The main advantage of trading using opposite S A P and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Chevron 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 Chevron will offset losses from the drop in Chevron's long position.| S A P vs. China Railway Construction | S A P vs. Dairy Farm International | S A P vs. CHAMPION IRON | S A P vs. Veolia Environnement SA |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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