Correlation Between SAP SE and Snowflake

Can any of the company-specific risk be diversified away by investing in both SAP SE and Snowflake 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 SAP SE and Snowflake into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SAP SE and Snowflake, you can compare the effects of market volatilities on SAP SE and Snowflake 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 SAP SE with a short position of Snowflake. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAP SE and Snowflake.

Diversification Opportunities for SAP SE and Snowflake

0.83

Correlation Coefficient

SAP SE  Snowflake

Very poor diversification

The 3 months correlation between SAP and Snowflake is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake and SAP SE 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 are associated (or correlated) with Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of SAP SE i.e., SAP SE and Snowflake go up and down completely randomly.

Pair Corralation between SAP SE and Snowflake

Assuming the 90 days trading horizon SAP SE is expected to generate 0.47 times more return on investment than Snowflake. However, SAP SE is 2.15 times less risky than Snowflake. It trades about 0.11 of its potential returns per unit of risk. Snowflake is currently generating about 0.03 per unit of risk. If you would invest  10,260  in SAP SE on October 12, 2024 and sell it today you would earn a total of  13,940  from holding SAP SE or generate 135.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

SAP SE  vs.  Snowflake

SAP SE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SAP SE reported solid returns over the last few months and may actually be approaching a breakup point.

Snowflake

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Snowflake are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Snowflake reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAP SE and Snowflake

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

The idea behind SAP SE and Snowflake 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.