Correlation Between InPlay Oil and S A P

Can any of the company-specific risk be diversified away by investing in both InPlay Oil 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 InPlay Oil 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 InPlay Oil Corp and SAP SE, you can compare the effects of market volatilities on InPlay Oil 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 InPlay Oil with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and S A P.

Diversification Opportunities for InPlay Oil and S A P

0.21

Correlation Coefficient

InPlay Oil  S A P

Modest diversification

The 3 months correlation between InPlay and SAP is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and InPlay Oil 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 InPlay Oil Corp 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 InPlay Oil i.e., InPlay Oil and S A P go up and down completely randomly.

Pair Corralation between InPlay Oil and S A P

Assuming the 90 days trading horizon InPlay Oil is expected to generate 1.15 times less return on investment than S A P. In addition to that, InPlay Oil is 1.8 times more volatile than SAP SE. It trades about 0.02 of its total potential returns per unit of risk. SAP SE is currently generating about 0.05 per unit of volatility. If you would invest  23,630  in SAP SE on December 30, 2024 and sell it today you would earn a total of  1,045  from holding SAP SE or generate 4.42% return on investment over 90 days.

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

InPlay Oil Corp  vs.  SAP SE

InPlay Oil Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in InPlay Oil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, InPlay Oil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SAP SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, S A P is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with InPlay Oil and S A P

The main advantage of trading using opposite InPlay Oil and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InPlay Oil 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 InPlay Oil Corp 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.