Correlation Between S A P and NEOSPERIENCE SPA
Can any of the company-specific risk be diversified away by investing in both S A P and NEOSPERIENCE SPA 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 NEOSPERIENCE SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and NEOSPERIENCE SPA, you can compare the effects of market volatilities on S A P and NEOSPERIENCE SPA 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 NEOSPERIENCE SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and NEOSPERIENCE SPA.
Diversification Opportunities for S A P and NEOSPERIENCE SPA
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between SAP and NEOSPERIENCE is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and NEOSPERIENCE SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEOSPERIENCE SPA 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 NEOSPERIENCE SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEOSPERIENCE SPA has no effect on the direction of S A P i.e., S A P and NEOSPERIENCE SPA go up and down completely randomly.
Pair Corralation between S A P and NEOSPERIENCE SPA
Assuming the 90 days trading horizon SAP SE is expected to generate 0.22 times more return on investment than NEOSPERIENCE SPA. However, SAP SE is 4.58 times less risky than NEOSPERIENCE SPA. It trades about 0.06 of its potential returns per unit of risk. NEOSPERIENCE SPA is currently generating about -0.02 per unit of risk. If you would invest 22,270 in SAP SE on August 27, 2024 and sell it today you would earn a total of 320.00 from holding SAP SE or generate 1.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. NEOSPERIENCE SPA
Performance |
| Timeline |
| SAP SE |
| NEOSPERIENCE SPA |
S A P and NEOSPERIENCE SPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and NEOSPERIENCE SPA
The main advantage of trading using opposite S A P and NEOSPERIENCE SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, NEOSPERIENCE SPA 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 NEOSPERIENCE SPA will offset losses from the drop in NEOSPERIENCE SPA's long position.The idea behind SAP SE and NEOSPERIENCE SPA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| NEOSPERIENCE SPA vs. REINET INVESTMENTS SCA | NEOSPERIENCE SPA vs. SOFTBANK P ADR | NEOSPERIENCE SPA vs. COMINTL BANK ADR1 | NEOSPERIENCE SPA vs. PRECISION DRILLING P |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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