Correlation Between SAP SE and ProStar Holdings

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

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

Diversification Opportunities for SAP SE and ProStar Holdings

0.59

Correlation Coefficient

SAP SE  ProStar Holdings

Very weak diversification

The 3 months correlation between SAP and ProStar is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and ProStar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProStar Holdings 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 ProStar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProStar Holdings has no effect on the direction of SAP SE i.e., SAP SE and ProStar Holdings go up and down completely randomly.

Pair Corralation between SAP SE and ProStar Holdings

Assuming the 90 days horizon SAP SE is expected to generate 4.23 times less return on investment than ProStar Holdings. But when comparing it to its historical volatility, SAP SE is 6.02 times less risky than ProStar Holdings. It trades about 0.08 of its potential returns per unit of risk. ProStar Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8.00  in ProStar Holdings on December 29, 2024 and sell it today you would earn a total of  0.03  from holding ProStar Holdings or generate 0.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

SAP SE  vs.  ProStar Holdings

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.

ProStar Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProStar Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ProStar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAP SE and ProStar Holdings

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

The idea behind SAP SE and ProStar Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.