Correlation Between Salesforce and Carebook Technologies

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

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

Diversification Opportunities for Salesforce and Carebook Technologies

-0.48

Correlation Coefficient

Salesforce  Carebook Technologies

Very good diversification

The 3 months correlation between Salesforce and Carebook is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Carebook Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carebook Technologies 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 Carebook Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carebook Technologies has no effect on the direction of Salesforce i.e., Salesforce and Carebook Technologies go up and down completely randomly.

Pair Corralation between Salesforce and Carebook Technologies

Considering the 90-day investment horizon Salesforce is expected to generate 6.34 times less return on investment than Carebook Technologies. But when comparing it to its historical volatility, Salesforce is 7.45 times less risky than Carebook Technologies. It trades about 0.1 of its potential returns per unit of risk. Carebook Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Carebook Technologies on October 24, 2024 and sell it today you would earn a total of  2.50  from holding Carebook Technologies or generate 35.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Salesforce  vs.  Carebook Technologies

Salesforce

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 8 (%) 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.

Carebook Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carebook Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Carebook Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Carebook Technologies

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

The idea behind Salesforce and Carebook Technologies 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.