Correlation Between MicroStrategy Incorporated and S A P

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

Diversification Opportunities for MicroStrategy Incorporated and S A P

-0.14

Correlation Coefficient

MicroStrategy Incorporated  S A P

Good diversification

The 3 months correlation between MicroStrategy and SAP is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and SAP SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE ADR and MicroStrategy Incorporated 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 MicroStrategy Incorporated 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 ADR has no effect on the direction of MicroStrategy Incorporated i.e., MicroStrategy Incorporated and S A P go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and S A P

Given the investment horizon of 90 days MicroStrategy Incorporated is expected to generate 1.28 times less return on investment than S A P. In addition to that, MicroStrategy Incorporated is 3.45 times more volatile than SAP SE ADR. It trades about 0.02 of its total potential returns per unit of risk. SAP SE ADR is currently generating about 0.08 per unit of volatility. If you would invest  24,883  in SAP SE ADR on December 30, 2024 and sell it today you would earn a total of  1,917  from holding SAP SE ADR or generate 7.7% return on investment over 90 days.

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

MicroStrategy Incorporated  vs.  SAP SE ADR

MicroStrategy Incorporated

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MicroStrategy Incorporated may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SAP SE ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting 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 MicroStrategy Incorporated and S A P

The main advantage of trading using opposite MicroStrategy Incorporated and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroStrategy Incorporated 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 MicroStrategy Incorporated and SAP SE ADR 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.