Correlation Between S A P and NexGen Energy
Can any of the company-specific risk be diversified away by investing in both S A P and NexGen Energy 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 NexGen Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and NexGen Energy, you can compare the effects of market volatilities on S A P and NexGen Energy 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 NexGen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and NexGen Energy.
Diversification Opportunities for S A P and NexGen Energy
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SAP and NexGen is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy 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 are associated (or correlated) with NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of S A P i.e., S A P and NexGen Energy go up and down completely randomly.
Pair Corralation between S A P and NexGen Energy
Assuming the 90 days horizon S A P is expected to generate 2.53 times less return on investment than NexGen Energy. But when comparing it to its historical volatility, SAP SE is 2.56 times less risky than NexGen Energy. It trades about 0.18 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 384.00 in NexGen Energy on April 22, 2025 and sell it today you would earn a total of 201.00 from holding NexGen Energy or generate 52.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SAP SE vs. NexGen Energy
Performance |
Timeline |
SAP SE |
NexGen Energy |
S A P and NexGen Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with S A P and NexGen Energy
The main advantage of trading using opposite S A P and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, NexGen Energy 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 NexGen Energy will offset losses from the drop in NexGen Energy's long position.S A P vs. PARKEN Sport Entertainment | S A P vs. BC IRON | S A P vs. Live Nation Entertainment | S A P vs. MAANSHAN IRON H |
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Check out your portfolio center.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 Stocks Directory module to find actively traded stocks across global markets.
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