Correlation Between Salesforce and Small Cap

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

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

Diversification Opportunities for Salesforce and Small Cap

0.58

Correlation Coefficient

Salesforce  Small Cap

Very weak diversification

The 3 months correlation between Salesforce and Small is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Salesforce i.e., Salesforce and Small Cap go up and down completely randomly.

Pair Corralation between Salesforce and Small Cap

Considering the 90-day investment horizon Salesforce is expected to under-perform the Small Cap. In addition to that, Salesforce is 1.43 times more volatile than Small Cap Growth. It trades about -0.18 of its total potential returns per unit of risk. Small Cap Growth is currently generating about -0.16 per unit of volatility. If you would invest  1,703  in Small Cap Growth on December 20, 2024 and sell it today you would lose (201.00) from holding Small Cap Growth or give up 11.8% of portfolio value over 90 days.

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

Salesforce  vs.  Small Cap Growth

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Small Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Salesforce and Small Cap

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

The idea behind Salesforce and Small Cap Growth 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.