Correlation Between SAP SE and Grupo Sports

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

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

Diversification Opportunities for SAP SE and Grupo Sports

0.8

Correlation Coefficient

SAP SE  Grupo Sports

Very poor diversification

The 3 months correlation between SAP and Grupo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Grupo Sports World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Sports World 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 Grupo Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Sports World has no effect on the direction of SAP SE i.e., SAP SE and Grupo Sports go up and down completely randomly.

Pair Corralation between SAP SE and Grupo Sports

Assuming the 90 days trading horizon SAP SE is expected to generate 1.58 times less return on investment than Grupo Sports. But when comparing it to its historical volatility, SAP SE is 1.38 times less risky than Grupo Sports. It trades about 0.15 of its potential returns per unit of risk. Grupo Sports World is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  530.00  in Grupo Sports World on September 26, 2024 and sell it today you would earn a total of  110.00  from holding Grupo Sports World or generate 20.75% return on investment over 90 days.

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

SAP SE  vs.  Grupo Sports World

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. In spite of fairly weak basic indicators, SAP SE showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Sports World

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Sports World are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grupo Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAP SE and Grupo Sports

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

The idea behind SAP SE and Grupo Sports World 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .