Correlation Between Salesforce and GPS Old

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

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

Diversification Opportunities for Salesforce and GPS Old

-0.39

Correlation Coefficient

Salesforce  GPS Old

Very good diversification

The 3 months correlation between Salesforce and GPS is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and GPS Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPS Old 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 GPS Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPS Old has no effect on the direction of Salesforce i.e., Salesforce and GPS Old go up and down completely randomly.

Pair Corralation between Salesforce and GPS Old

Considering the 90-day investment horizon Salesforce is expected to generate 1.1 times less return on investment than GPS Old. But when comparing it to its historical volatility, Salesforce is 1.77 times less risky than GPS Old. It trades about 0.12 of its potential returns per unit of risk. GPS Old is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,224  in GPS Old on October 26, 2024 and sell it today you would earn a total of  104.00  from holding GPS Old or generate 4.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	18.7%
Values	Daily Returns

Salesforce  vs.  GPS Old

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.

GPS Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPS Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GPS Old is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Salesforce and GPS Old

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

The idea behind Salesforce and GPS Old 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.