Correlation Between Salesforce and LYFT

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

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

Diversification Opportunities for Salesforce and LYFT

0.83

Correlation Coefficient

Salesforce  LYFT

Very poor diversification

The 3 months correlation between Salesforce and LYFT is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and LYFT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYFT Inc 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 LYFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYFT Inc has no effect on the direction of Salesforce i.e., Salesforce and LYFT go up and down completely randomly.

Pair Corralation between Salesforce and LYFT

Considering the 90-day investment horizon Salesforce is expected to generate 0.53 times more return on investment than LYFT. However, Salesforce is 1.89 times less risky than LYFT. It trades about 0.24 of its potential returns per unit of risk. LYFT Inc is currently generating about 0.09 per unit of risk. If you would invest  25,651  in Salesforce on September 15, 2024 and sell it today you would earn a total of  9,780  from holding Salesforce or generate 38.13% return on investment over 90 days.

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

Salesforce  vs.  LYFT Inc

Salesforce

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 18 (%) 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.

LYFT Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LYFT Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, LYFT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and LYFT

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

The idea behind Salesforce and LYFT Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.