Correlation Between Salesforce and Cabana Target

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

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

Diversification Opportunities for Salesforce and Cabana Target

0.09

Correlation Coefficient

Salesforce  Cabana Target

Significant diversification

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

Pair Corralation between Salesforce and Cabana Target

Considering the 90-day investment horizon Salesforce is expected to under-perform the Cabana Target. In addition to that, Salesforce is 1.47 times more volatile than Cabana Target Leading. It trades about -0.25 of its total potential returns per unit of risk. Cabana Target Leading is currently generating about -0.22 per unit of volatility. If you would invest  2,123  in Cabana Target Leading on October 10, 2024 and sell it today you would lose (88.00) from holding Cabana Target Leading or give up 4.15% of portfolio value over 90 days.

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

Salesforce  vs.  Cabana Target Leading

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.

Cabana Target Leading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabana Target Leading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cabana Target is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and Cabana Target

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

The idea behind Salesforce and Cabana Target Leading 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.