Correlation Between S A P and Sparta Commercial
Can any of the company-specific risk be diversified away by investing in both S A P and Sparta Commercial 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 Sparta Commercial 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 Sparta Commercial Services, you can compare the effects of market volatilities on S A P and Sparta Commercial 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 Sparta Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Sparta Commercial.
Diversification Opportunities for S A P and Sparta Commercial
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SAP and Sparta is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Sparta Commercial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Commercial 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 Sparta Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Commercial has no effect on the direction of S A P i.e., S A P and Sparta Commercial go up and down completely randomly.
Pair Corralation between S A P and Sparta Commercial
Considering the 90-day investment horizon SAP SE ADR is expected to generate 0.14 times more return on investment than Sparta Commercial. However, SAP SE ADR is 7.32 times less risky than Sparta Commercial. It trades about 0.2 of its potential returns per unit of risk. Sparta Commercial Services is currently generating about 0.01 per unit of risk. If you would invest 19,903 in SAP SE ADR on November 3, 2024 and sell it today you would earn a total of 7,764 from holding SAP SE ADR or generate 39.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE ADR vs. Sparta Commercial Services
Performance |
| Timeline |
| SAP SE ADR |
| Sparta Commercial |
S A P and Sparta Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Sparta Commercial
The main advantage of trading using opposite S A P and Sparta Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Sparta Commercial 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 Sparta Commercial will offset losses from the drop in Sparta Commercial's 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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