Correlation Between S A P and Tyler Technologies

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

Diversification Opportunities for S A P and Tyler Technologies

0.79

Correlation Coefficient

S A P  Tyler Technologies

Poor diversification

The 3 months correlation between SAP and Tyler is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Tyler Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyler Technologies 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 Tyler Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyler Technologies has no effect on the direction of S A P i.e., S A P and Tyler Technologies go up and down completely randomly.

Pair Corralation between S A P and Tyler Technologies

Considering the 90-day investment horizon SAP SE ADR is expected to generate 1.07 times more return on investment than Tyler Technologies. However, S A P is 1.07 times more volatile than Tyler Technologies. It trades about 0.06 of its potential returns per unit of risk. Tyler Technologies is currently generating about -0.02 per unit of risk. If you would invest  25,351  in SAP SE ADR on December 26, 2024 and sell it today you would earn a total of  1,435  from holding SAP SE ADR or generate 5.66% return on investment over 90 days.

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

SAP SE ADR  vs.  Tyler Technologies

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 4 (%) 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.

Tyler Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tyler Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Tyler Technologies is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with S A P and Tyler Technologies

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

The idea behind SAP SE ADR and Tyler Technologies 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.