Correlation Between Salesforce and American Express

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

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

Diversification Opportunities for Salesforce and American Express

0.65

Correlation Coefficient

Salesforce  American Express

Poor diversification

The 3 months correlation between Salesforce and American is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Salesforce i.e., Salesforce and American Express go up and down completely randomly.

Pair Corralation between Salesforce and American Express

Considering the 90-day investment horizon Salesforce is expected to under-perform the American Express. In addition to that, Salesforce is 1.05 times more volatile than American Express. It trades about -0.18 of its total potential returns per unit of risk. American Express is currently generating about -0.12 per unit of volatility. If you would invest  28,532  in American Express on December 23, 2024 and sell it today you would lose (3,502) from holding American Express or give up 12.27% of portfolio value over 90 days.

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

Salesforce  vs.  American Express

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.

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Salesforce and American Express

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

The idea behind Salesforce and American Express 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.