Correlation Between SAP SE and LQwD FinTech

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

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

Diversification Opportunities for SAP SE and LQwD FinTech

0.01

Correlation Coefficient

SAP SE  LQwD FinTech

Significant diversification

The 3 months correlation between SAP and LQwD is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and LQwD FinTech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LQwD FinTech Corp 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 LQwD FinTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LQwD FinTech Corp has no effect on the direction of SAP SE i.e., SAP SE and LQwD FinTech go up and down completely randomly.

Pair Corralation between SAP SE and LQwD FinTech

Assuming the 90 days horizon SAP SE is expected to generate 0.24 times more return on investment than LQwD FinTech. However, SAP SE is 4.24 times less risky than LQwD FinTech. It trades about 0.08 of its potential returns per unit of risk. LQwD FinTech Corp is currently generating about -0.09 per unit of risk. If you would invest  24,596  in SAP SE on December 29, 2024 and sell it today you would earn a total of  2,004  from holding SAP SE or generate 8.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

SAP SE  vs.  LQwD FinTech Corp

SAP SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 6 (%) 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.

LQwD FinTech Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days LQwD FinTech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental 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 SAP SE and LQwD FinTech

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

The idea behind SAP SE and LQwD FinTech Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.