Correlation Between S A P and Workiva

Can any of the company-specific risk be diversified away by investing in both S A P and Workiva 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 S A P and Workiva into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for S A P and Workiva

0.82

Correlation Coefficient

S A P  Workiva

Very poor diversification

The 3 months correlation between SAP and Workiva is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Workiva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workiva and S A P 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 SAP SE are associated (or correlated) with Workiva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workiva has no effect on the direction of S A P i.e., S A P and Workiva go up and down completely randomly.

Pair Corralation between S A P and Workiva

Assuming the 90 days trading horizon SAP SE is expected to generate 0.64 times more return on investment than Workiva. However, SAP SE is 1.56 times less risky than Workiva. It trades about 0.13 of its potential returns per unit of risk. Workiva is currently generating about 0.02 per unit of risk. If you would invest  10,077  in SAP SE on September 4, 2024 and sell it today you would earn a total of  13,028  from holding SAP SE or generate 129.28% return on investment over 90 days.

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

SAP SE  vs.  Workiva

SAP SE

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, S A P unveiled solid returns over the last few months and may actually be approaching a breakup point.

Workiva

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Workiva are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Workiva reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with S A P and Workiva

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

The idea behind SAP SE and Workiva 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.