Correlation Between S A P and SAP SE

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

Diversification Opportunities for S A P and SAP SE

0.99

Correlation Coefficient

S A P  SAP SE

No risk reduction

The 3 months correlation between SAP and SAP is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 SAP SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of S A P i.e., S A P and SAP SE go up and down completely randomly.

Pair Corralation between S A P and SAP SE

Considering the 90-day investment horizon SAP SE ADR is expected to generate 0.92 times more return on investment than SAP SE. However, SAP SE ADR is 1.08 times less risky than SAP SE. It trades about 0.1 of its potential returns per unit of risk. SAP SE is currently generating about 0.09 per unit of risk. If you would invest  24,569  in SAP SE ADR on December 19, 2024 and sell it today you would earn a total of  2,495  from holding SAP SE ADR or generate 10.16% return on investment over 90 days.

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

SAP SE ADR  vs.  SAP SE

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.

SAP SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, SAP SE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with S A P and SAP SE

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

The idea behind SAP SE ADR and SAP SE 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.