Correlation Between Salesforce and KCI SA

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

By analyzing existing cross correlation between PZ Cormay SA and KCI SA, you can compare the effects of market volatilities on Salesforce and KCI SA 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 KCI SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and KCI SA.

Diversification Opportunities for Salesforce and KCI SA

0.68

Correlation Coefficient

Salesforce  KCI SA

Poor diversification

The 3 months correlation between Salesforce and KCI is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding PZ Cormay SA and KCI SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCI SA 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 PZ Cormay SA are associated (or correlated) with KCI SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCI SA has no effect on the direction of Salesforce i.e., Salesforce and KCI SA go up and down completely randomly.

Pair Corralation between Salesforce and KCI SA

Assuming the 90 days trading horizon PZ Cormay SA is expected to generate 1.61 times more return on investment than KCI SA. However, Salesforce is 1.61 times more volatile than KCI SA. It trades about 0.13 of its potential returns per unit of risk. KCI SA is currently generating about 0.08 per unit of risk. If you would invest  38.00  in PZ Cormay SA on December 30, 2024 and sell it today you would earn a total of  14.00  from holding PZ Cormay SA or generate 36.84% return on investment over 90 days.

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

PZ Cormay SA  vs.  KCI SA

PZ Cormay SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PZ Cormay SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Salesforce reported solid returns over the last few months and may actually be approaching a breakup point.

KCI SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KCI SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, KCI SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and KCI SA

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

The idea behind PZ Cormay SA and KCI SA 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.