Correlation Between S A P and RenoWorks Software

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

Diversification Opportunities for S A P and RenoWorks Software

0.52

Correlation Coefficient

S A P  RenoWorks Software

Very weak diversification

The 3 months correlation between SAP and RenoWorks is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and RenoWorks Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenoWorks Software 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 RenoWorks Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenoWorks Software has no effect on the direction of S A P i.e., S A P and RenoWorks Software go up and down completely randomly.

Pair Corralation between S A P and RenoWorks Software

If you would invest  27,256  in SAP SE ADR on December 4, 2024 and sell it today you would earn a total of  435.00  from holding SAP SE ADR or generate 1.6% return on investment over 90 days.

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

SAP SE ADR  vs.  RenoWorks Software

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 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 April 2025.

RenoWorks Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RenoWorks Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, RenoWorks Software reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with S A P and RenoWorks Software

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

The idea behind SAP SE ADR and RenoWorks Software 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.