Correlation Between Salesforce and Franklin Small

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

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

Diversification Opportunities for Salesforce and Franklin Small

0.72

Correlation Coefficient

Salesforce  Franklin Small

Poor diversification

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

Pair Corralation between Salesforce and Franklin Small

Considering the 90-day investment horizon Salesforce is expected to generate 1.76 times more return on investment than Franklin Small. However, Salesforce is 1.76 times more volatile than Franklin Small Cap. It trades about 0.11 of its potential returns per unit of risk. Franklin Small Cap is currently generating about 0.12 per unit of risk. If you would invest  29,013  in Salesforce on October 25, 2024 and sell it today you would earn a total of  4,249  from holding Salesforce or generate 14.65% return on investment over 90 days.

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

Salesforce  vs.  Franklin Small Cap

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.

Franklin Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Franklin Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Salesforce and Franklin Small

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

The idea behind Salesforce and Franklin Small Cap 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.