Correlation Between Salesforce and BASF SE

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

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

Diversification Opportunities for Salesforce and BASF SE

-0.62

Correlation Coefficient

Salesforce  BASF SE

Excellent diversification

The 3 months correlation between Salesforce and BASF is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and BASF SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE ADR 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE ADR has no effect on the direction of Salesforce i.e., Salesforce and BASF SE go up and down completely randomly.

Pair Corralation between Salesforce and BASF SE

Considering the 90-day investment horizon Salesforce is expected to generate 0.9 times more return on investment than BASF SE. However, Salesforce is 1.11 times less risky than BASF SE. It trades about 0.27 of its potential returns per unit of risk. BASF SE ADR is currently generating about -0.06 per unit of risk. If you would invest  24,767  in Salesforce on September 3, 2024 and sell it today you would earn a total of  8,232  from holding Salesforce or generate 33.24% return on investment over 90 days.

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

Salesforce  vs.  BASF SE ADR

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 unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

BASF SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BASF SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental 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 BASF SE

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

The idea behind Salesforce and BASF SE ADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .