Correlation Between Bank of America and SAP SE

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

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

Diversification Opportunities for Bank of America and SAP SE

-0.45

Correlation Coefficient

Bank of America  SAP SE

Very good diversification

The 3 months correlation between Bank and SAP is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and Bank of America 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 Bank of America are associated (or correlated) with SAP SE. 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 Bank of America i.e., Bank of America and SAP SE go up and down completely randomly.

Pair Corralation between Bank of America and SAP SE

Assuming the 90 days trading horizon Bank of America is expected to generate 0.33 times more return on investment than SAP SE. However, Bank of America is 3.02 times less risky than SAP SE. It trades about 0.09 of its potential returns per unit of risk. SAP SE is currently generating about -0.1 per unit of risk. If you would invest  2,013  in Bank of America on May 28, 2025 and sell it today you would earn a total of  52.00  from holding Bank of America or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  SAP SE

Bank of America

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, Bank of America is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

SAP SE

Risk-Adjusted Performance

Weakest

Over the last 90 days SAP SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bank of America and SAP SE

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

The idea behind Bank of America 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.