Correlation Between S A P and Axihub

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

Diversification Opportunities for S A P and Axihub

-0.48

Correlation Coefficient

S A P  Axihub

Very good diversification

The 3 months correlation between SAP and Axihub is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Axihub Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axihub 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 Axihub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axihub Inc has no effect on the direction of S A P i.e., S A P and Axihub go up and down completely randomly.

Pair Corralation between S A P and Axihub

Considering the 90-day investment horizon S A P is expected to generate 3.19 times less return on investment than Axihub. But when comparing it to its historical volatility, SAP SE ADR is 11.23 times less risky than Axihub. It trades about 0.13 of its potential returns per unit of risk. Axihub Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Axihub Inc on September 14, 2024 and sell it today you would lose (0.05) from holding Axihub Inc or give up 62.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.95%
Values	Daily Returns

SAP SE ADR  vs.  Axihub Inc

SAP SE ADR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 11 (%) 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.

Axihub Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axihub Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Axihub is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with S A P and Axihub

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

The idea behind SAP SE ADR and Axihub 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.