Correlation Between S A P and Warehouses
Can any of the company-specific risk be diversified away by investing in both S A P and Warehouses 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 Warehouses into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and Warehouses De Pauw, you can compare the effects of market volatilities on S A P and Warehouses 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 Warehouses. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Warehouses.
Diversification Opportunities for S A P and Warehouses
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SAP and Warehouses is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Warehouses De Pauw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warehouses De Pauw 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 Warehouses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warehouses De Pauw has no effect on the direction of S A P i.e., S A P and Warehouses go up and down completely randomly.
Pair Corralation between S A P and Warehouses
Assuming the 90 days trading horizon SAP SE is expected to generate 0.73 times more return on investment than Warehouses. However, SAP SE is 1.38 times less risky than Warehouses. It trades about 0.24 of its potential returns per unit of risk. Warehouses De Pauw is currently generating about -0.06 per unit of risk. If you would invest 19,144 in SAP SE on December 4, 2024 and sell it today you would earn a total of 8,011 from holding SAP SE or generate 41.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. Warehouses De Pauw
Performance |
| Timeline |
| SAP SE |
| Warehouses De Pauw |
S A P and Warehouses Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Warehouses
The main advantage of trading using opposite S A P and Warehouses positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Warehouses 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 Warehouses will offset losses from the drop in Warehouses' long position.| S A P vs. Gaming and Leisure | S A P vs. Perdoceo Education | S A P vs. LG Display Co | S A P vs. Platinum Investment Management |
| Warehouses vs. Extra Space Storage | Warehouses vs. REXFORD INDREALTY DL 01 | Warehouses vs. CubeSmart | Warehouses vs. First Industrial Realty |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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