Correlation Between S A P and Madison Square

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

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

Diversification Opportunities for S A P and Madison Square

0.02

Correlation Coefficient

S A P  Madison Square

Significant diversification

The 3 months correlation between SAP and Madison is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden and S A P 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 ADR are associated (or correlated) with Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of S A P i.e., S A P and Madison Square go up and down completely randomly.

Pair Corralation between S A P and Madison Square

Considering the 90-day investment horizon SAP SE ADR is expected to under-perform the Madison Square. But the stock apears to be less risky and, when comparing its historical volatility, SAP SE ADR is 1.01 times less risky than Madison Square. The stock trades about -0.07 of its potential returns per unit of risk. The Madison Square Garden is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  19,853  in Madison Square Garden on May 19, 2025 and sell it today you would lose (92.00) from holding Madison Square Garden or give up 0.46% of portfolio value over 90 days.

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

SAP SE ADR  vs.  Madison Square Garden

SAP SE ADR

Risk-Adjusted Performance

Weakest

Over the last 90 days SAP SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Madison Square Garden

Risk-Adjusted Performance

Weakest

Over the last 90 days Madison Square Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Madison Square is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with S A P and Madison Square

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

The idea behind SAP SE ADR and Madison Square Garden 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..