Correlation Between PTC and S A P

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

Diversification Opportunities for PTC and S A P

-0.67

Correlation Coefficient

PTC  S A P

Excellent diversification

The 3 months correlation between PTC and SAP is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding PTC Inc 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 PTC 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 PTC Inc 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 PTC i.e., PTC and S A P go up and down completely randomly.

Pair Corralation between PTC and S A P

Considering the 90-day investment horizon PTC Inc is expected to under-perform the S A P. In addition to that, PTC is 1.89 times more volatile than SAP SE ADR. It trades about -0.28 of its total potential returns per unit of risk. SAP SE ADR is currently generating about 0.14 per unit of volatility. If you would invest  27,560  in SAP SE ADR on November 28, 2024 and sell it today you would earn a total of  1,028  from holding SAP SE ADR or generate 3.73% return on investment over 90 days.

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

PTC Inc  vs.  SAP SE ADR

PTC Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PTC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SAP SE ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, S A P reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PTC and S A P

The main advantage of trading using opposite PTC and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PTC 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 PTC Inc 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.