Correlation Between Salesforce and Melcor Developments

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

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

Diversification Opportunities for Salesforce and Melcor Developments

-0.51

Correlation Coefficient

Salesforce  Melcor Developments

Excellent diversification

The 3 months correlation between Salesforce and Melcor is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Melcor Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Developments 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 Melcor Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melcor Developments has no effect on the direction of Salesforce i.e., Salesforce and Melcor Developments go up and down completely randomly.

Pair Corralation between Salesforce and Melcor Developments

Considering the 90-day investment horizon Salesforce is expected to generate 1.96 times more return on investment than Melcor Developments. However, Salesforce is 1.96 times more volatile than Melcor Developments. It trades about -0.01 of its potential returns per unit of risk. Melcor Developments is currently generating about -0.14 per unit of risk. If you would invest  33,872  in Salesforce on October 25, 2024 and sell it today you would lose (610.00) from holding Salesforce or give up 1.8% of portfolio value over 90 days.

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

Salesforce  vs.  Melcor Developments

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.

Melcor Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melcor Developments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Salesforce and Melcor Developments

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

The idea behind Salesforce and Melcor Developments 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.