Correlation Between Salesforce and Signature Resources

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

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

Diversification Opportunities for Salesforce and Signature Resources

-0.66

Correlation Coefficient

Salesforce  Signature Resources

Excellent diversification

The 3 months correlation between Salesforce and Signature is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding SalesforceCom CDR and Signature Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Resources 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 Signature Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Resources has no effect on the direction of Salesforce i.e., Salesforce and Signature Resources go up and down completely randomly.

Pair Corralation between Salesforce and Signature Resources

Assuming the 90 days trading horizon SalesforceCom CDR is expected to under-perform the Signature Resources. But the stock apears to be less risky and, when comparing its historical volatility, SalesforceCom CDR is 7.48 times less risky than Signature Resources. The stock trades about -0.29 of its potential returns per unit of risk. The Signature Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Signature Resources on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Signature Resources or generate 0.0% return on investment over 90 days.

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

SalesforceCom CDR  vs.  Signature Resources

SalesforceCom CDR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Signature Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signature Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Salesforce and Signature Resources

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

The idea behind SalesforceCom CDR and Signature Resources 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..