Correlation Between DAIRY FARM and S A P

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

Diversification Opportunities for DAIRY FARM and S A P

0.38

Correlation Coefficient

DAIRY FARM  S A P

Weak diversification

The 3 months correlation between DAIRY and SAP is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and S A P go up and down completely randomly.

Pair Corralation between DAIRY FARM and S A P

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 1.53 times more return on investment than S A P. However, DAIRY FARM is 1.53 times more volatile than SAP SE. It trades about 0.2 of its potential returns per unit of risk. SAP SE is currently generating about 0.03 per unit of risk. If you would invest  216.00  in DAIRY FARM INTL on April 25, 2025 and sell it today you would earn a total of  68.00  from holding DAIRY FARM INTL or generate 31.48% return on investment over 90 days.

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

DAIRY FARM INTL  vs.  SAP SE

DAIRY FARM INTL

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DAIRY FARM unveiled solid returns over the last few months and may actually be approaching a breakup point.

SAP SE

Risk-Adjusted Performance

Insignificant

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 basic indicators, S A P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DAIRY FARM and S A P

The main advantage of trading using opposite DAIRY FARM and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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 DAIRY FARM INTL 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.