Correlation Between SAP SE and ATT

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

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

Diversification Opportunities for SAP SE and ATT

0.79

Correlation Coefficient

SAP SE  ATT

Poor diversification

The 3 months correlation between SAP and ATT is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of SAP SE i.e., SAP SE and ATT go up and down completely randomly.

Pair Corralation between SAP SE and ATT

Assuming the 90 days trading horizon SAP SE is expected to generate 0.87 times more return on investment than ATT. However, SAP SE is 1.15 times less risky than ATT. It trades about 0.15 of its potential returns per unit of risk. ATT Inc is currently generating about 0.09 per unit of risk. If you would invest  443,000  in SAP SE on September 29, 2024 and sell it today you would earn a total of  57,000  from holding SAP SE or generate 12.87% return on investment over 90 days.

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

SAP SE  vs.  ATT Inc

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.

ATT Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SAP SE and ATT

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

The idea behind SAP SE and ATT Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.