Correlation Between S A P and TrustBIX

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

Diversification Opportunities for S A P and TrustBIX

-0.8

Correlation Coefficient

S A P  TrustBIX

Pay attention - limited upside

The 3 months correlation between SAP and TrustBIX is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and TrustBIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrustBIX 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 TrustBIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrustBIX has no effect on the direction of S A P i.e., S A P and TrustBIX go up and down completely randomly.

Pair Corralation between S A P and TrustBIX

Considering the 90-day investment horizon SAP SE ADR is expected to generate 0.13 times more return on investment than TrustBIX. However, SAP SE ADR is 7.57 times less risky than TrustBIX. It trades about 0.16 of its potential returns per unit of risk. TrustBIX is currently generating about -0.09 per unit of risk. If you would invest  24,159  in SAP SE ADR on December 2, 2024 and sell it today you would earn a total of  3,341  from holding SAP SE ADR or generate 13.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	93.85%
Values	Daily Returns

SAP SE ADR  vs.  TrustBIX

SAP SE ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 12 (%) 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.

TrustBIX

Risk-Adjusted Performance

Very Weak

Over the last 90 days TrustBIX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with S A P and TrustBIX

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

The idea behind SAP SE ADR and TrustBIX 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.