Correlation Between S A P and Mcig

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

Diversification Opportunities for S A P and Mcig

-0.13

Correlation Coefficient

S A P  Mcig

Good diversification

The 3 months correlation between SAP and Mcig is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Mcig Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mcig Inc 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 Mcig. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mcig Inc has no effect on the direction of S A P i.e., S A P and Mcig go up and down completely randomly.

Pair Corralation between S A P and Mcig

Considering the 90-day investment horizon S A P is expected to generate 1.05 times less return on investment than Mcig. But when comparing it to its historical volatility, SAP SE ADR is 8.21 times less risky than Mcig. It trades about 0.11 of its potential returns per unit of risk. Mcig Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.71  in Mcig Inc on December 26, 2024 and sell it today you would lose (0.26) from holding Mcig Inc or give up 36.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

SAP SE ADR  vs.  Mcig Inc

SAP SE ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 8 (%) 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 April 2025.

Mcig Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mcig Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Mcig may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with S A P and Mcig

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

The idea behind SAP SE ADR and Mcig Inc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.