Correlation Between Salesforce and MBIA

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

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

Diversification Opportunities for Salesforce and MBIA

0.79

Correlation Coefficient

Salesforce  MBIA

Poor diversification

The 3 months correlation between Salesforce and MBIA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and MBIA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBIA 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 MBIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBIA Inc has no effect on the direction of Salesforce i.e., Salesforce and MBIA go up and down completely randomly.

Pair Corralation between Salesforce and MBIA

Considering the 90-day investment horizon Salesforce is expected to generate 2.34 times less return on investment than MBIA. But when comparing it to its historical volatility, Salesforce is 2.42 times less risky than MBIA. It trades about 0.27 of its potential returns per unit of risk. MBIA Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  363.00  in MBIA Inc on September 1, 2024 and sell it today you would earn a total of  326.00  from holding MBIA Inc or generate 89.81% return on investment over 90 days.

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

Salesforce  vs.  MBIA Inc

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 unsteady basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

MBIA Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MBIA Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental drivers, MBIA demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and MBIA

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

The idea behind Salesforce and MBIA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.