Correlation Between Salesforce and Hanwha Aerospace

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

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

Diversification Opportunities for Salesforce and Hanwha Aerospace

0.6

Correlation Coefficient

Salesforce  Hanwha Aerospace

Poor diversification

The 3 months correlation between Salesforce and Hanwha is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Hanwha Aerospace Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Aerospace 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 Salesforce are associated (or correlated) with Hanwha Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Aerospace has no effect on the direction of Salesforce i.e., Salesforce and Hanwha Aerospace go up and down completely randomly.

Pair Corralation between Salesforce and Hanwha Aerospace

Considering the 90-day investment horizon Salesforce is expected to generate 1.84 times less return on investment than Hanwha Aerospace. But when comparing it to its historical volatility, Salesforce is 1.67 times less risky than Hanwha Aerospace. It trades about 0.1 of its potential returns per unit of risk. Hanwha Aerospace Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,620,551  in Hanwha Aerospace Co on September 2, 2024 and sell it today you would earn a total of  24,629,449  from holding Hanwha Aerospace Co or generate 372.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.58%
Values	Daily Returns

Salesforce  vs.  Hanwha Aerospace Co

Salesforce

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Hanwha Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanwha Aerospace Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanwha Aerospace is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and Hanwha Aerospace

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

The idea behind Salesforce and Hanwha Aerospace Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.