Correlation Between S A P and Shoals Technologies
Can any of the company-specific risk be diversified away by investing in both S A P and Shoals Technologies 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 Shoals Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE ADR and Shoals Technologies Group, you can compare the effects of market volatilities on S A P and Shoals Technologies 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 Shoals Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Shoals Technologies.
Diversification Opportunities for S A P and Shoals Technologies
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SAP and Shoals is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Shoals Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoals Technologies 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 ADR are associated (or correlated) with Shoals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoals Technologies has no effect on the direction of S A P i.e., S A P and Shoals Technologies go up and down completely randomly.
Pair Corralation between S A P and Shoals Technologies
Considering the 90-day investment horizon SAP SE ADR is expected to generate 0.35 times more return on investment than Shoals Technologies. However, SAP SE ADR is 2.88 times less risky than Shoals Technologies. It trades about 0.13 of its potential returns per unit of risk. Shoals Technologies Group is currently generating about -0.06 per unit of risk. If you would invest 11,510 in SAP SE ADR on November 2, 2024 and sell it today you would earn a total of 16,426 from holding SAP SE ADR or generate 142.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE ADR vs. Shoals Technologies Group
Performance |
| Timeline |
| SAP SE ADR |
| Shoals Technologies |
S A P and Shoals Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Shoals Technologies
The main advantage of trading using opposite S A P and Shoals Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Shoals Technologies 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 Shoals Technologies will offset losses from the drop in Shoals Technologies' long position.| S A P vs. Tyler Technologies | S A P vs. Roper Technologies, | S A P vs. Cadence Design Systems | S A P vs. PTC Inc |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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