Correlation Between Deutsche Lufthansa and S A P

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

Diversification Opportunities for Deutsche Lufthansa and S A P

-0.01

Correlation Coefficient

Deutsche Lufthansa  S A P

Good diversification

The 3 months correlation between Deutsche and SAP is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Lufthansa AG and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and Deutsche Lufthansa 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 Deutsche Lufthansa AG 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 Deutsche Lufthansa i.e., Deutsche Lufthansa and S A P go up and down completely randomly.

Pair Corralation between Deutsche Lufthansa and S A P

Assuming the 90 days horizon Deutsche Lufthansa AG is expected to generate 1.53 times more return on investment than S A P. However, Deutsche Lufthansa is 1.53 times more volatile than SAP SE. It trades about 0.11 of its potential returns per unit of risk. SAP SE is currently generating about 0.06 per unit of risk. If you would invest  621.00  in Deutsche Lufthansa AG on December 29, 2024 and sell it today you would earn a total of  101.00  from holding Deutsche Lufthansa AG or generate 16.26% return on investment over 90 days.

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

Deutsche Lufthansa AG  vs.  SAP SE

Deutsche Lufthansa

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Lufthansa AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Deutsche Lufthansa reported solid returns over the last few months and may actually be approaching a breakup point.

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 stable basic indicators, S A P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deutsche Lufthansa and S A P

The main advantage of trading using opposite Deutsche Lufthansa and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Lufthansa 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 Deutsche Lufthansa AG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.