Correlation Between Salesforce and Kingfisher PLC

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

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

Diversification Opportunities for Salesforce and Kingfisher PLC

0.2

Correlation Coefficient

Salesforce  Kingfisher PLC

Modest diversification

The 3 months correlation between Salesforce and Kingfisher is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Kingfisher PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher PLC ADR 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 Kingfisher PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingfisher PLC ADR has no effect on the direction of Salesforce i.e., Salesforce and Kingfisher PLC go up and down completely randomly.

Pair Corralation between Salesforce and Kingfisher PLC

Considering the 90-day investment horizon Salesforce is expected to under-perform the Kingfisher PLC. In addition to that, Salesforce is 1.37 times more volatile than Kingfisher PLC ADR. It trades about -0.04 of its total potential returns per unit of risk. Kingfisher PLC ADR is currently generating about 0.01 per unit of volatility. If you would invest  631.00  in Kingfisher PLC ADR on November 28, 2024 and sell it today you would earn a total of  4.00  from holding Kingfisher PLC ADR or generate 0.63% return on investment over 90 days.

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

Salesforce  vs.  Kingfisher PLC ADR

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 very healthy basic indicators, Salesforce is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Kingfisher PLC ADR

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfisher PLC ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Kingfisher PLC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and Kingfisher PLC

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

The idea behind Salesforce and Kingfisher PLC ADR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.