Correlation Between S A P and TomTom NV
Can any of the company-specific risk be diversified away by investing in both S A P and TomTom NV 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 TomTom NV 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 TomTom NV, you can compare the effects of market volatilities on S A P and TomTom NV 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 TomTom NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and TomTom NV.
Diversification Opportunities for S A P and TomTom NV
Poor diversification
The 3 months correlation between SAP and TomTom is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and TomTom NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TomTom NV 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 TomTom NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TomTom NV has no effect on the direction of S A P i.e., S A P and TomTom NV go up and down completely randomly.
Pair Corralation between S A P and TomTom NV
Considering the 90-day investment horizon S A P is expected to generate 1.11 times less return on investment than TomTom NV. In addition to that, S A P is 1.24 times more volatile than TomTom NV. It trades about 0.15 of its total potential returns per unit of risk. TomTom NV is currently generating about 0.21 per unit of volatility. If you would invest 555.00 in TomTom NV on September 5, 2024 and sell it today you would earn a total of 30.00 from holding TomTom NV or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE ADR vs. TomTom NV
Performance |
| Timeline |
| SAP SE ADR |
| TomTom NV |
S A P and TomTom NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and TomTom NV
The main advantage of trading using opposite S A P and TomTom NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, TomTom NV 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 TomTom NV will offset losses from the drop in TomTom NV's long position.| S A P vs. Tyler Technologies | S A P vs. Roper Technologies, Common | S A P vs. Cadence Design Systems | S A P vs. PTC Inc |
| TomTom NV vs. Aspen Technology | TomTom NV vs. Bentley Systems | TomTom NV vs. Tyler Technologies | TomTom NV vs. Blackbaud |
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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