Correlation Between Salesforce and ECGI Holdings

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

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

Diversification Opportunities for Salesforce and ECGI Holdings

-0.45

Correlation Coefficient

Salesforce  ECGI Holdings

Very good diversification

The 3 months correlation between Salesforce and ECGI is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and ECGI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECGI Holdings 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 ECGI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECGI Holdings has no effect on the direction of Salesforce i.e., Salesforce and ECGI Holdings go up and down completely randomly.

Pair Corralation between Salesforce and ECGI Holdings

Considering the 90-day investment horizon Salesforce is expected to generate 0.16 times more return on investment than ECGI Holdings. However, Salesforce is 6.34 times less risky than ECGI Holdings. It trades about 0.1 of its potential returns per unit of risk. ECGI Holdings is currently generating about 0.01 per unit of risk. If you would invest  28,984  in Salesforce on October 10, 2024 and sell it today you would earn a total of  3,509  from holding Salesforce or generate 12.11% return on investment over 90 days.

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

Salesforce  vs.  ECGI Holdings

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.

ECGI Holdings

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ECGI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak technical and fundamental indicators, ECGI Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Salesforce and ECGI Holdings

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

The idea behind Salesforce and ECGI Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.