Correlation Between Salesforce and Eastern Platinum

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

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

Diversification Opportunities for Salesforce and Eastern Platinum

-0.16

Correlation Coefficient

Salesforce  Eastern Platinum

Good diversification

The 3 months correlation between Salesforce and Eastern is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Eastern Platinum Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Platinum 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 Eastern Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Platinum has no effect on the direction of Salesforce i.e., Salesforce and Eastern Platinum go up and down completely randomly.

Pair Corralation between Salesforce and Eastern Platinum

Considering the 90-day investment horizon Salesforce is expected to under-perform the Eastern Platinum. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 2.76 times less risky than Eastern Platinum. The stock trades about -0.04 of its potential returns per unit of risk. The Eastern Platinum Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Eastern Platinum Limited on November 29, 2024 and sell it today you would lose (2.00) from holding Eastern Platinum Limited or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Salesforce  vs.  Eastern Platinum Limited

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 very healthy basic indicators, Salesforce is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Eastern Platinum

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Salesforce and Eastern Platinum

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

The idea behind Salesforce and Eastern Platinum Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.