Correlation Between Salesforce and Mastercard

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

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

Diversification Opportunities for Salesforce and Mastercard

0.92

Correlation Coefficient

Salesforce  Mastercard

Almost no diversification

The 3 months correlation between Salesforce and Mastercard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Salesforce i.e., Salesforce and Mastercard go up and down completely randomly.

Pair Corralation between Salesforce and Mastercard

Considering the 90-day investment horizon Salesforce is expected to generate 1.39 times more return on investment than Mastercard. However, Salesforce is 1.39 times more volatile than Mastercard. It trades about 0.27 of its potential returns per unit of risk. Mastercard is currently generating about 0.19 per unit of risk. If you would invest  24,767  in Salesforce on August 31, 2024 and sell it today you would earn a total of  8,234  from holding Salesforce or generate 33.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Salesforce  vs.  Mastercard

Salesforce

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 21 (%) 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.

Mastercard

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mastercard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Mastercard

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

The idea behind Salesforce and Mastercard 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..