Correlation Between S A P and Uber Technologies

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

Diversification Opportunities for S A P and Uber Technologies

0.32

Correlation Coefficient

S A P  Uber Technologies

Weak diversification

The 3 months correlation between SAP and Uber is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of S A P i.e., S A P and Uber Technologies go up and down completely randomly.

Pair Corralation between S A P and Uber Technologies

Considering the 90-day investment horizon SAP SE ADR is expected to generate 0.61 times more return on investment than Uber Technologies. However, SAP SE ADR is 1.65 times less risky than Uber Technologies. It trades about 0.12 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.05 per unit of risk. If you would invest  18,424  in SAP SE ADR on August 30, 2024 and sell it today you would earn a total of  4,778  from holding SAP SE ADR or generate 25.93% return on investment over 90 days.

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

SAP SE ADR  vs.  Uber Technologies

SAP SE ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, S A P is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Uber Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Uber Technologies is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with S A P and Uber Technologies

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

The idea behind SAP SE ADR and Uber 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.