Correlation Between SAP SE and Defentect

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

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

Diversification Opportunities for SAP SE and Defentect

-0.09

Correlation Coefficient

SAP SE  Defentect

Good diversification

The 3 months correlation between SAP and Defentect is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Defentect Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defentect Group 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 Defentect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defentect Group has no effect on the direction of SAP SE i.e., SAP SE and Defentect go up and down completely randomly.

Pair Corralation between SAP SE and Defentect

Assuming the 90 days horizon SAP SE is expected to generate 4.41 times less return on investment than Defentect. But when comparing it to its historical volatility, SAP SE is 3.94 times less risky than Defentect. It trades about 0.03 of its potential returns per unit of risk. Defentect Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.43  in Defentect Group on April 27, 2025 and sell it today you would earn a total of  0.00  from holding Defentect Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

SAP SE  vs.  Defentect Group

SAP SE

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, SAP SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Defentect Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defentect Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Defentect may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with SAP SE and Defentect

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

The idea behind SAP SE and Defentect Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.