Correlation Between ScanSource and S A P

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

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

Diversification Opportunities for ScanSource and S A P

-0.24

Correlation Coefficient

ScanSource  S A P

Very good diversification

The 3 months correlation between ScanSource and SAP is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and ScanSource 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 ScanSource are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of ScanSource i.e., ScanSource and S A P go up and down completely randomly.

Pair Corralation between ScanSource and S A P

Assuming the 90 days horizon ScanSource is expected to under-perform the S A P. In addition to that, ScanSource is 1.55 times more volatile than SAP SE. It trades about -0.18 of its total potential returns per unit of risk. SAP SE is currently generating about 0.06 per unit of volatility. If you would invest  23,630  in SAP SE on December 28, 2024 and sell it today you would earn a total of  1,295  from holding SAP SE or generate 5.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

ScanSource  vs.  SAP SE

ScanSource

Risk-Adjusted Performance

Very Weak

Over the last 90 days ScanSource has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic 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.

SAP SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, S A P is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ScanSource and S A P

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

The idea behind ScanSource and SAP SE 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.