Correlation Between Salesforce and Nova Eye

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

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

Diversification Opportunities for Salesforce and Nova Eye

-0.72

Correlation Coefficient

Salesforce  Nova Eye

Pay attention - limited upside

The 3 months correlation between Salesforce and Nova is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Nova Eye Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Eye Medical 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 Nova Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Eye Medical has no effect on the direction of Salesforce i.e., Salesforce and Nova Eye go up and down completely randomly.

Pair Corralation between Salesforce and Nova Eye

Considering the 90-day investment horizon Salesforce is expected to under-perform the Nova Eye. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 4.65 times less risky than Nova Eye. The stock trades about -0.25 of its potential returns per unit of risk. The Nova Eye Medical is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Nova Eye Medical on October 10, 2024 and sell it today you would earn a total of  3.00  from holding Nova Eye Medical or generate 18.75% return on investment over 90 days.

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

Salesforce  vs.  Nova Eye Medical

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.

Nova Eye Medical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Eye Medical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Nova Eye unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Nova Eye

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

The idea behind Salesforce and Nova Eye Medical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.