Correlation Between S A P and Deneb Investments
Can any of the company-specific risk be diversified away by investing in both S A P and Deneb Investments 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 Deneb Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sappi and Deneb Investments, you can compare the effects of market volatilities on S A P and Deneb Investments 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 Deneb Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Deneb Investments.
Diversification Opportunities for S A P and Deneb Investments
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SAP and Deneb is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sappi and Deneb Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deneb Investments 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 Sappi are associated (or correlated) with Deneb Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deneb Investments has no effect on the direction of S A P i.e., S A P and Deneb Investments go up and down completely randomly.
Pair Corralation between S A P and Deneb Investments
Assuming the 90 days trading horizon Sappi is expected to generate 1.45 times more return on investment than Deneb Investments. However, S A P is 1.45 times more volatile than Deneb Investments. It trades about 0.11 of its potential returns per unit of risk. Deneb Investments is currently generating about -0.06 per unit of risk. If you would invest 476,600 in Sappi on September 1, 2024 and sell it today you would earn a total of 27,700 from holding Sappi or generate 5.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sappi vs. Deneb Investments
Performance |
| Timeline |
| Sappi |
| Deneb Investments |
S A P and Deneb Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Deneb Investments
The main advantage of trading using opposite S A P and Deneb Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Deneb Investments 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 Deneb Investments will offset losses from the drop in Deneb Investments' long position.| S A P vs. Sasol Ltd Bee | S A P vs. Growthpoint Properties | S A P vs. AfricaRhodium ETF | S A P vs. CoreShares Preference Share |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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