Correlation Between Salesforce and Franklin Liberty

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

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

Diversification Opportunities for Salesforce and Franklin Liberty

0.36

Correlation Coefficient

Salesforce  Franklin Liberty

Weak diversification

The 3 months correlation between Salesforce and Franklin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Franklin Liberty High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty High 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 Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty High has no effect on the direction of Salesforce i.e., Salesforce and Franklin Liberty go up and down completely randomly.

Pair Corralation between Salesforce and Franklin Liberty

Considering the 90-day investment horizon Salesforce is expected to generate 8.97 times more return on investment than Franklin Liberty. However, Salesforce is 8.97 times more volatile than Franklin Liberty High. It trades about 0.25 of its potential returns per unit of risk. Franklin Liberty High is currently generating about 0.1 per unit of risk. If you would invest  25,250  in Salesforce on August 30, 2024 and sell it today you would earn a total of  7,751  from holding Salesforce or generate 30.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Salesforce  vs.  Franklin Liberty High

Salesforce

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 19 (%) 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 Liberty High

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty High are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and Franklin Liberty

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

The idea behind Salesforce and Franklin Liberty High 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.