Correlation Between Salesforce and Emerge Commerce

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

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

Diversification Opportunities for Salesforce and Emerge Commerce

-0.4

Correlation Coefficient

Salesforce  Emerge Commerce

Very good diversification

The 3 months correlation between Salesforce and Emerge is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding SalesforceCom CDR and Emerge Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerge Commerce and Salesforce 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 SalesforceCom CDR are associated (or correlated) with Emerge Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerge Commerce has no effect on the direction of Salesforce i.e., Salesforce and Emerge Commerce go up and down completely randomly.

Pair Corralation between Salesforce and Emerge Commerce

Assuming the 90 days trading horizon SalesforceCom CDR is expected to generate 0.27 times more return on investment than Emerge Commerce. However, SalesforceCom CDR is 3.65 times less risky than Emerge Commerce. It trades about 0.23 of its potential returns per unit of risk. Emerge Commerce is currently generating about 0.06 per unit of risk. If you would invest  2,050  in SalesforceCom CDR on September 16, 2024 and sell it today you would earn a total of  769.00  from holding SalesforceCom CDR or generate 37.51% return on investment over 90 days.

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

SalesforceCom CDR  vs.  Emerge Commerce

SalesforceCom CDR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 18 (%) 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.

Emerge Commerce

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emerge Commerce are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Emerge Commerce showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Emerge Commerce

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

The idea behind SalesforceCom CDR and Emerge Commerce 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.