Correlation Between Salesforce and FAR

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

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

Diversification Opportunities for Salesforce and FAR

-0.34

Correlation Coefficient

Salesforce  FAR

Very good diversification

The 3 months correlation between Salesforce and FAR is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and FAR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAR Limited 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 FAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAR Limited has no effect on the direction of Salesforce i.e., Salesforce and FAR go up and down completely randomly.

Pair Corralation between Salesforce and FAR

Considering the 90-day investment horizon Salesforce is expected to generate 1.46 times more return on investment than FAR. However, Salesforce is 1.46 times more volatile than FAR Limited. It trades about 0.11 of its potential returns per unit of risk. FAR Limited is currently generating about 0.05 per unit of risk. If you would invest  26,391  in Salesforce on November 20, 2024 and sell it today you would earn a total of  6,263  from holding Salesforce or generate 23.73% return on investment over 90 days.

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

Salesforce  vs.  FAR Limited

Salesforce

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

FAR Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days FAR Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FAR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Salesforce and FAR

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

The idea behind Salesforce and FAR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.