Correlation Between Salesforce and New Tech

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

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

Diversification Opportunities for Salesforce and New Tech

-0.8

Correlation Coefficient

Salesforce  New Tech

Pay attention - limited upside

The 3 months correlation between Salesforce and New is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and New Tech Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Tech Capital 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 New Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Tech Capital has no effect on the direction of Salesforce i.e., Salesforce and New Tech go up and down completely randomly.

Pair Corralation between Salesforce and New Tech

Considering the 90-day investment horizon Salesforce is expected to generate 0.68 times more return on investment than New Tech. However, Salesforce is 1.47 times less risky than New Tech. It trades about 0.11 of its potential returns per unit of risk. New Tech Capital is currently generating about -0.09 per unit of risk. If you would invest  28,411  in Salesforce on October 23, 2024 and sell it today you would earn a total of  4,045  from holding Salesforce or generate 14.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Salesforce  vs.  New Tech Capital

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.

New Tech Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Tech Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Salesforce and New Tech

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

The idea behind Salesforce and New Tech Capital 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.