Correlation Between China Railway and S A P

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

Diversification Opportunities for China Railway and S A P

0.13

Correlation Coefficient

China Railway  S A P

Average diversification

The 3 months correlation between China and SAP is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and China Railway 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 China Railway Construction 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 China Railway i.e., China Railway and S A P go up and down completely randomly.

Pair Corralation between China Railway and S A P

Assuming the 90 days horizon China Railway is expected to generate 1.63 times less return on investment than S A P. But when comparing it to its historical volatility, China Railway Construction is 1.63 times less risky than S A P. It trades about 0.13 of its potential returns per unit of risk. SAP SE is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  23,734  in SAP SE on April 23, 2025 and sell it today you would earn a total of  2,571  from holding SAP SE or generate 10.83% return on investment over 90 days.

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

China Railway Construction  vs.  SAP SE

China Railway Constr

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, China Railway may actually be approaching a critical reversion point that can send shares even higher in August 2025.

SAP SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with China Railway and S A P

The main advantage of trading using opposite China Railway and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway 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 China Railway Construction 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.