Correlation Between Salesforce and China Green

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

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

Diversification Opportunities for Salesforce and China Green

0.26

Correlation Coefficient

Salesforce  China Green

Modest diversification

The 3 months correlation between Salesforce and China is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and China Green Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Green Agriculture 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 Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Green Agriculture has no effect on the direction of Salesforce i.e., Salesforce and China Green go up and down completely randomly.

Pair Corralation between Salesforce and China Green

Considering the 90-day investment horizon Salesforce is expected to generate 1.19 times less return on investment than China Green. But when comparing it to its historical volatility, Salesforce is 5.0 times less risky than China Green. It trades about 0.27 of its potential returns per unit of risk. China Green Agriculture is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  173.00  in China Green Agriculture on September 1, 2024 and sell it today you would earn a total of  25.00  from holding China Green Agriculture or generate 14.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Salesforce  vs.  China Green Agriculture

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

China Green Agriculture

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Green Agriculture are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, China Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and China Green

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

The idea behind Salesforce and China Green Agriculture 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.