Correlation Between Salesforce and IShares SP

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

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

Diversification Opportunities for Salesforce and IShares SP

0.73

Correlation Coefficient

Salesforce  IShares SP

Poor diversification

The 3 months correlation between Salesforce and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and iShares SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP SmallCap 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 IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP SmallCap has no effect on the direction of Salesforce i.e., Salesforce and IShares SP go up and down completely randomly.

Pair Corralation between Salesforce and IShares SP

Considering the 90-day investment horizon Salesforce is expected to generate 1.17 times more return on investment than IShares SP. However, Salesforce is 1.17 times more volatile than iShares SP SmallCap. It trades about -0.21 of its potential returns per unit of risk. iShares SP SmallCap is currently generating about -0.35 per unit of risk. If you would invest  35,117  in Salesforce on October 8, 2024 and sell it today you would lose (1,827) from holding Salesforce or give up 5.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Salesforce  vs.  iShares SP SmallCap

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.

iShares SP SmallCap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP SmallCap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Salesforce and IShares SP

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

The idea behind Salesforce and iShares SP SmallCap 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 Stocks Directory module to find actively traded stocks across global markets.