Correlation Between Salesforce and Valeura Energy

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

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

Diversification Opportunities for Salesforce and Valeura Energy

0.9

Correlation Coefficient

Salesforce  Valeura Energy

Almost no diversification

The 3 months correlation between Salesforce and Valeura is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SalesforceCom CDR and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Salesforce i.e., Salesforce and Valeura Energy go up and down completely randomly.

Pair Corralation between Salesforce and Valeura Energy

Assuming the 90 days trading horizon Salesforce is expected to generate 2.64 times less return on investment than Valeura Energy. But when comparing it to its historical volatility, SalesforceCom CDR is 1.52 times less risky than Valeura Energy. It trades about 0.15 of its potential returns per unit of risk. Valeura Energy is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  452.00  in Valeura Energy on October 1, 2024 and sell it today you would earn a total of  210.00  from holding Valeura Energy or generate 46.46% return on investment over 90 days.

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

SalesforceCom CDR  vs.  Valeura Energy

SalesforceCom CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 12 (%) 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.

Valeura Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Valeura Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Valeura Energy

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

The idea behind SalesforceCom CDR and Valeura Energy 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 Global Correlations module to find global opportunities by holding instruments from different markets.