Correlation Between NextPlat Corp and SAP SE

Can any of the company-specific risk be diversified away by investing in both NextPlat Corp and SAP SE 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 NextPlat Corp and SAP SE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NextPlat Corp and SAP SE, you can compare the effects of market volatilities on NextPlat Corp and SAP SE 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 NextPlat Corp with a short position of SAP SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextPlat Corp and SAP SE.

Diversification Opportunities for NextPlat Corp and SAP SE

-0.77

Correlation Coefficient

NextPlat Corp  SAP SE

Pay attention - limited upside

The 3 months correlation between NextPlat and SAP is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding NextPlat Corp and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and NextPlat Corp 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 NextPlat Corp are associated (or correlated) with SAP SE. 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 NextPlat Corp i.e., NextPlat Corp and SAP SE go up and down completely randomly.

Pair Corralation between NextPlat Corp and SAP SE

Assuming the 90 days horizon NextPlat Corp is expected to generate 18.3 times more return on investment than SAP SE. However, NextPlat Corp is 18.3 times more volatile than SAP SE. It trades about 0.04 of its potential returns per unit of risk. SAP SE is currently generating about 0.18 per unit of risk. If you would invest  20.00  in NextPlat Corp on September 22, 2024 and sell it today you would lose (9.00) from holding NextPlat Corp or give up 45.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	57.14%
Values	Daily Returns

NextPlat Corp  vs.  SAP SE

NextPlat Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextPlat Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

SAP SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, SAP SE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NextPlat Corp and SAP SE

The main advantage of trading using opposite NextPlat Corp and SAP SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextPlat Corp position performs unexpectedly, SAP SE 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 SAP SE will offset losses from the drop in SAP SE's long position.

The idea behind NextPlat 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 Global Correlations module to find global opportunities by holding instruments from different markets.