Correlation Between PROS Holdings and S A P

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Can any of the company-specific risk be diversified away by investing in both PROS Holdings 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 PROS Holdings 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 PROS Holdings and SAP SE ADR, you can compare the effects of market volatilities on PROS Holdings 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 PROS Holdings with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROS Holdings and S A P.

Diversification Opportunities for PROS Holdings and S A P

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between PROS and SAP is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding PROS Holdings and SAP SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE ADR and PROS Holdings 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 PROS Holdings 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 ADR has no effect on the direction of PROS Holdings i.e., PROS Holdings and S A P go up and down completely randomly.

Pair Corralation between PROS Holdings and S A P

Considering the 90-day investment horizon PROS Holdings is expected to under-perform the S A P. In addition to that, PROS Holdings is 1.16 times more volatile than SAP SE ADR. It trades about -0.04 of its total potential returns per unit of risk. SAP SE ADR is currently generating about 0.15 per unit of volatility. If you would invest  18,917  in SAP SE ADR on December 29, 2023 and sell it today you would earn a total of  792.00  from holding SAP SE ADR or generate 4.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

PROS Holdings  vs.  SAP SE ADR

 Performance 
       Timeline  
PROS Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days PROS Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
SAP SE ADR 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, S A P reported solid returns over the last few months and may actually be approaching a breakup point.

PROS Holdings and S A P Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PROS Holdings and S A P

The main advantage of trading using opposite PROS Holdings and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PROS Holdings 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 PROS Holdings and SAP SE ADR 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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