Correlation Between Salesforce and Adidas AG

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

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

Diversification Opportunities for Salesforce and Adidas AG

0.09

Correlation Coefficient

Salesforce  Adidas AG

Significant diversification

The 3 months correlation between Salesforce and Adidas is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Salesforce i.e., Salesforce and Adidas AG go up and down completely randomly.

Pair Corralation between Salesforce and Adidas AG

Considering the 90-day investment horizon Salesforce is expected to under-perform the Adidas AG. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.32 times less risky than Adidas AG. The stock trades about -0.29 of its potential returns per unit of risk. The adidas AG is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  24,070  in adidas AG on October 10, 2024 and sell it today you would lose (710.00) from holding adidas AG or give up 2.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Salesforce  vs.  adidas AG

Salesforce

Risk-Adjusted Performance

7 of 100

OK

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

adidas AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days adidas AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Adidas AG is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Salesforce and Adidas AG

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

The idea behind Salesforce and adidas AG 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.