Correlation Between Salesforce and MultiPlan

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

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

Diversification Opportunities for Salesforce and MultiPlan

-0.45

Correlation Coefficient

Salesforce  MultiPlan

Very good diversification

The 3 months correlation between Salesforce and MultiPlan is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and MultiPlan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MultiPlan 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 MultiPlan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MultiPlan has no effect on the direction of Salesforce i.e., Salesforce and MultiPlan go up and down completely randomly.

Pair Corralation between Salesforce and MultiPlan

Considering the 90-day investment horizon Salesforce is expected to generate 0.3 times more return on investment than MultiPlan. However, Salesforce is 3.39 times less risky than MultiPlan. It trades about 0.07 of its potential returns per unit of risk. MultiPlan is currently generating about -0.05 per unit of risk. If you would invest  20,860  in Salesforce on August 31, 2024 and sell it today you would earn a total of  12,139  from holding Salesforce or generate 58.19% return on investment over 90 days.

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

Salesforce  vs.  MultiPlan

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.

MultiPlan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MultiPlan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, MultiPlan is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and MultiPlan

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

The idea behind Salesforce and MultiPlan 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.