Correlation Between Salesforce and Magic Eden

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

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

Diversification Opportunities for Salesforce and Magic Eden

0.42

Correlation Coefficient

Salesforce  Magic Eden

Very weak diversification

The 3 months correlation between Salesforce and Magic is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Magic Eden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magic Eden 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 Magic Eden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magic Eden has no effect on the direction of Salesforce i.e., Salesforce and Magic Eden go up and down completely randomly.

Pair Corralation between Salesforce and Magic Eden

Considering the 90-day investment horizon Salesforce is expected to under-perform the Magic Eden. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 173.4 times less risky than Magic Eden. The stock trades about -0.2 of its potential returns per unit of risk. The Magic Eden is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Magic Eden on October 8, 2024 and sell it today you would earn a total of  335.00  from holding Magic Eden or generate 9.223372036854776E16% return on investment over 90 days.

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

Salesforce  vs.  Magic Eden

Salesforce

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 8 (%) 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.

Magic Eden

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Eden are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Magic Eden exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Magic Eden

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

The idea behind Salesforce and Magic Eden 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.