Correlation Between Champion Iron and Salesforce

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

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

Diversification Opportunities for Champion Iron and Salesforce

-0.68

Correlation Coefficient

Champion Iron  Salesforce

Excellent diversification

The 3 months correlation between Champion and Salesforce is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and SalesforceCom CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalesforceCom CDR and Champion Iron 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 Champion Iron 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 Champion Iron i.e., Champion Iron and Salesforce go up and down completely randomly.

Pair Corralation between Champion Iron and Salesforce

Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Salesforce. But the stock apears to be less risky and, when comparing its historical volatility, Champion Iron is 1.04 times less risky than Salesforce. The stock trades about -0.24 of its potential returns per unit of risk. The SalesforceCom CDR is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  2,798  in SalesforceCom CDR on October 8, 2024 and sell it today you would lose (153.00) from holding SalesforceCom CDR or give up 5.47% of portfolio value over 90 days.

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

Champion Iron  vs.  SalesforceCom CDR

Champion Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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.

SalesforceCom CDR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Champion Iron and Salesforce

The main advantage of trading using opposite Champion Iron and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron 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 Champion Iron 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.