Correlation Between Salesforce and China Animal

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

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

Diversification Opportunities for Salesforce and China Animal

0.37

Correlation Coefficient

Salesforce  China Animal

Weak diversification

The 3 months correlation between Salesforce and China is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and China Animal Husbandry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Animal Husbandry 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 China Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Animal Husbandry has no effect on the direction of Salesforce i.e., Salesforce and China Animal go up and down completely randomly.

Pair Corralation between Salesforce and China Animal

Considering the 90-day investment horizon Salesforce is expected to under-perform the China Animal. In addition to that, Salesforce is 1.36 times more volatile than China Animal Husbandry. It trades about -0.18 of its total potential returns per unit of risk. China Animal Husbandry is currently generating about -0.08 per unit of volatility. If you would invest  694.00  in China Animal Husbandry on December 24, 2024 and sell it today you would lose (45.00) from holding China Animal Husbandry or give up 6.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.08%
Values	Daily Returns

Salesforce  vs.  China Animal Husbandry

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

China Animal Husbandry

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Animal Husbandry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Salesforce and China Animal

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

The idea behind Salesforce and China Animal Husbandry 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.