Correlation Between S A P and ManpowerGroup

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Can any of the company-specific risk be diversified away by investing in both S A P and ManpowerGroup 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 ManpowerGroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and ManpowerGroup, you can compare the effects of market volatilities on S A P and ManpowerGroup 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 ManpowerGroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and ManpowerGroup.

Diversification Opportunities for S A P and ManpowerGroup

-0.63
  Correlation Coefficient

Excellent diversification

The 3 months correlation between SAP and ManpowerGroup is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and ManpowerGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ManpowerGroup 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 ManpowerGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ManpowerGroup has no effect on the direction of S A P i.e., S A P and ManpowerGroup go up and down completely randomly.

Pair Corralation between S A P and ManpowerGroup

Assuming the 90 days trading horizon SAP SE is expected to generate 0.87 times more return on investment than ManpowerGroup. However, SAP SE is 1.15 times less risky than ManpowerGroup. It trades about 0.39 of its potential returns per unit of risk. ManpowerGroup is currently generating about 0.06 per unit of risk. If you would invest  21,860  in SAP SE on September 17, 2024 and sell it today you would earn a total of  2,245  from holding SAP SE or generate 10.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

SAP SE  vs.  ManpowerGroup

 Performance 
       Timeline  
SAP SE 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
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.
ManpowerGroup 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ManpowerGroup has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

S A P and ManpowerGroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with S A P and ManpowerGroup

The main advantage of trading using opposite S A P and ManpowerGroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, ManpowerGroup 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 ManpowerGroup will offset losses from the drop in ManpowerGroup's long position.
The idea behind SAP SE and ManpowerGroup 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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