Correlation Between Avanos Medical and S A P

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

Diversification Opportunities for Avanos Medical and S A P

0.46

Correlation Coefficient

Avanos Medical  S A P

Very weak diversification

The 3 months correlation between Avanos and SAP is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and Avanos Medical 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 Avanos Medical 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 Avanos Medical i.e., Avanos Medical and S A P go up and down completely randomly.

Pair Corralation between Avanos Medical and S A P

Assuming the 90 days trading horizon Avanos Medical is expected to under-perform the S A P. But the stock apears to be less risky and, when comparing its historical volatility, Avanos Medical is 1.89 times less risky than S A P. The stock trades about -0.37 of its potential returns per unit of risk. The SAP SE is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  26,530  in SAP SE on December 30, 2024 and sell it today you would lose (1,855) from holding SAP SE or give up 6.99% of portfolio value over 90 days.

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

Avanos Medical  vs.  SAP SE

Avanos Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm 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 Avanos Medical and S A P

The main advantage of trading using opposite Avanos Medical and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avanos Medical 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 Avanos Medical 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.