Correlation Between S A P and Blackbaud

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

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

Diversification Opportunities for S A P and Blackbaud

-0.5

Correlation Coefficient

S A P  Blackbaud

Very good diversification

The 3 months correlation between SAP and Blackbaud is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Blackbaud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackbaud 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 ADR are associated (or correlated) with Blackbaud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackbaud has no effect on the direction of S A P i.e., S A P and Blackbaud go up and down completely randomly.

Pair Corralation between S A P and Blackbaud

Considering the 90-day investment horizon SAP SE ADR is expected to generate 0.8 times more return on investment than Blackbaud. However, SAP SE ADR is 1.25 times less risky than Blackbaud. It trades about 0.11 of its potential returns per unit of risk. Blackbaud is currently generating about 0.03 per unit of risk. If you would invest  11,335  in SAP SE ADR on October 3, 2024 and sell it today you would earn a total of  13,286  from holding SAP SE ADR or generate 117.21% return on investment over 90 days.

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

SAP SE ADR  vs.  Blackbaud

SAP SE ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 10 (%) 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 February 2025.

Blackbaud

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackbaud has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with S A P and Blackbaud

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

The idea behind SAP SE ADR and Blackbaud 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.