Correlation Between S A P and Nowigence

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

Diversification Opportunities for S A P and Nowigence

0.0

Correlation Coefficient

S A P  Nowigence

Pay attention - limited upside

The 3 months correlation between SAP and Nowigence is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Nowigence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nowigence 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 Nowigence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nowigence has no effect on the direction of S A P i.e., S A P and Nowigence go up and down completely randomly.

Pair Corralation between S A P and Nowigence

If you would invest  23,140  in SAP SE ADR on September 15, 2024 and sell it today you would earn a total of  2,190  from holding SAP SE ADR or generate 9.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SAP SE ADR  vs.  Nowigence

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 abnormal basic indicators, S A P reported solid returns over the last few months and may actually be approaching a breakup point.

Nowigence

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nowigence has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nowigence is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with S A P and Nowigence

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

The idea behind SAP SE ADR and Nowigence 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.