Correlation Between BHPA and Salesforce

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

By analyzing existing cross correlation between BHPA Inc and Salesforce, you can compare the effects of market volatilities on BHPA and Salesforce 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 BHPA with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHPA and Salesforce.

Diversification Opportunities for BHPA and Salesforce

0.03

Correlation Coefficient

BHPA  Salesforce

Significant diversification

The 3 months correlation between BHPA and Salesforce is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BHPA Inc and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and BHPA 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 BHPA Inc are associated (or correlated) with Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of BHPA i.e., BHPA and Salesforce go up and down completely randomly.

Pair Corralation between BHPA and Salesforce

Given the investment horizon of 90 days BHPA Inc is expected to generate 6.58 times more return on investment than Salesforce. However, BHPA is 6.58 times more volatile than Salesforce. It trades about 0.03 of its potential returns per unit of risk. Salesforce is currently generating about -0.07 per unit of risk. If you would invest  0.50  in BHPA Inc on December 2, 2024 and sell it today you would lose (0.16) from holding BHPA Inc or give up 32.0% of portfolio value over 90 days.

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

BHPA Inc  vs.  Salesforce

BHPA Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BHPA Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, BHPA sustained solid returns over the last few months and may actually be approaching a breakup point.

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with BHPA and Salesforce

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

The idea behind BHPA Inc and Salesforce 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.