Correlation Between S A P and Avery Dennison
Can any of the company-specific risk be diversified away by investing in both S A P and Avery Dennison 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 Avery Dennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and Avery Dennison Corp, you can compare the effects of market volatilities on S A P and Avery Dennison 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 Avery Dennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Avery Dennison.
Diversification Opportunities for S A P and Avery Dennison
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SAP and Avery is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Avery Dennison Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avery Dennison Corp 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 Avery Dennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avery Dennison Corp has no effect on the direction of S A P i.e., S A P and Avery Dennison go up and down completely randomly.
Pair Corralation between S A P and Avery Dennison
Assuming the 90 days trading horizon SAP SE is expected to generate 1.15 times more return on investment than Avery Dennison. However, S A P is 1.15 times more volatile than Avery Dennison Corp. It trades about 0.32 of its potential returns per unit of risk. Avery Dennison Corp is currently generating about -0.06 per unit of risk. If you would invest 22,040 in SAP SE on September 13, 2024 and sell it today you would earn a total of 2,110 from holding SAP SE or generate 9.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. Avery Dennison Corp
Performance |
| Timeline |
| SAP SE |
| Avery Dennison Corp |
S A P and Avery Dennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Avery Dennison
The main advantage of trading using opposite S A P and Avery Dennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Avery Dennison 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 Avery Dennison will offset losses from the drop in Avery Dennison's long position.| S A P vs. INTERSHOP Communications Aktiengesellschaft | S A P vs. Ribbon Communications | S A P vs. PLAYTIKA HOLDING DL 01 | S A P vs. Entravision Communications |
| Avery Dennison vs. FUJIFILM Holdings | Avery Dennison vs. Konica Minolta | Avery Dennison vs. KOKUYO LTD | Avery Dennison vs. Takkt AG |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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