Correlation Between Haier Smart and S A P

Can any of the company-specific risk be diversified away by investing in both Haier Smart and S A P 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 Haier Smart and S A P into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Haier Smart Home and SAP SE, you can compare the effects of market volatilities on Haier Smart and S A P 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 Haier Smart with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haier Smart and S A P.

Diversification Opportunities for Haier Smart and S A P

0.68

Correlation Coefficient

Haier Smart  S A P

Poor diversification

The 3 months correlation between Haier and SAP is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Haier Smart Home and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and Haier Smart 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 Haier Smart Home are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Haier Smart i.e., Haier Smart and S A P go up and down completely randomly.

Pair Corralation between Haier Smart and S A P

Assuming the 90 days trading horizon Haier Smart is expected to generate 1.47 times less return on investment than S A P. In addition to that, Haier Smart is 1.38 times more volatile than SAP SE. It trades about 0.1 of its total potential returns per unit of risk. SAP SE is currently generating about 0.2 per unit of volatility. If you would invest  23,105  in SAP SE on December 1, 2024 and sell it today you would earn a total of  3,425  from holding SAP SE or generate 14.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Haier Smart Home  vs.  SAP SE

Haier Smart Home

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Haier Smart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SAP SE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, S A P unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haier Smart and S A P

The main advantage of trading using opposite Haier Smart and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haier Smart position performs unexpectedly, S A P 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 S A P will offset losses from the drop in S A P's long position.

The idea behind Haier Smart Home and SAP SE 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.