Correlation Between Citigroup and Salesforce

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

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

Diversification Opportunities for Citigroup and Salesforce

0.93

Correlation Coefficient

Citigroup  Salesforce

Almost no diversification

The 3 months correlation between Citigroup and Salesforce is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SalesforceCom CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalesforceCom CDR and Citigroup 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 Citigroup 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 SalesforceCom CDR has no effect on the direction of Citigroup i.e., Citigroup and Salesforce go up and down completely randomly.

Pair Corralation between Citigroup and Salesforce

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.99 times less return on investment than Salesforce. In addition to that, Citigroup is 1.13 times more volatile than SalesforceCom CDR. It trades about 0.12 of its total potential returns per unit of risk. SalesforceCom CDR is currently generating about 0.28 per unit of volatility. If you would invest  1,981  in SalesforceCom CDR on August 31, 2024 and sell it today you would earn a total of  669.00  from holding SalesforceCom CDR or generate 33.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  SalesforceCom CDR

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

SalesforceCom CDR

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Salesforce

The main advantage of trading using opposite Citigroup and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup and SalesforceCom CDR 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.