Correlation Between Salesforce and Cadiz

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

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

Diversification Opportunities for Salesforce and Cadiz

-0.27

Correlation Coefficient

Salesforce  Cadiz

Very good diversification

The 3 months correlation between Salesforce and Cadiz is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Cadiz Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadiz Inc 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 Cadiz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadiz Inc has no effect on the direction of Salesforce i.e., Salesforce and Cadiz go up and down completely randomly.

Pair Corralation between Salesforce and Cadiz

Considering the 90-day investment horizon Salesforce is expected to under-perform the Cadiz. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 2.01 times less risky than Cadiz. The stock trades about -0.05 of its potential returns per unit of risk. The Cadiz Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  444.00  in Cadiz Inc on November 28, 2024 and sell it today you would lose (12.00) from holding Cadiz Inc or give up 2.7% of portfolio value over 90 days.

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

Salesforce  vs.  Cadiz Inc

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Cadiz Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cadiz Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Cadiz is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Salesforce and Cadiz

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

The idea behind Salesforce and Cadiz Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.