Correlation Between AOYAMA TRADING and S A P

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

Diversification Opportunities for AOYAMA TRADING and S A P

0.28

Correlation Coefficient

AOYAMA TRADING  S A P

Modest diversification

The 3 months correlation between AOYAMA and SAP is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding AOYAMA TRADING and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and AOYAMA TRADING 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 AOYAMA TRADING 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 AOYAMA TRADING i.e., AOYAMA TRADING and S A P go up and down completely randomly.

Pair Corralation between AOYAMA TRADING and S A P

Assuming the 90 days horizon AOYAMA TRADING is expected to under-perform the S A P. But the stock apears to be less risky and, when comparing its historical volatility, AOYAMA TRADING is 1.47 times less risky than S A P. The stock trades about -0.07 of its potential returns per unit of risk. The SAP SE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  23,620  in SAP SE on December 28, 2024 and sell it today you would earn a total of  1,335  from holding SAP SE or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

AOYAMA TRADING  vs.  SAP SE

AOYAMA TRADING

Risk-Adjusted Performance

Very Weak

Over the last 90 days AOYAMA TRADING has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AOYAMA TRADING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SAP SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AOYAMA TRADING and S A P

The main advantage of trading using opposite AOYAMA TRADING and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AOYAMA TRADING 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 AOYAMA TRADING 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.