Correlation Between Salesforce and OMRON Corp

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

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

Diversification Opportunities for Salesforce and OMRON Corp

0.72

Correlation Coefficient

Salesforce  OMRON Corp

Poor diversification

The 3 months correlation between Salesforce and OMRON is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and OMRON Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OMRON Corp ADR 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 OMRON Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OMRON Corp ADR has no effect on the direction of Salesforce i.e., Salesforce and OMRON Corp go up and down completely randomly.

Pair Corralation between Salesforce and OMRON Corp

Considering the 90-day investment horizon Salesforce is expected to under-perform the OMRON Corp. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.04 times less risky than OMRON Corp. The stock trades about -0.18 of its potential returns per unit of risk. The OMRON Corp ADR is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  3,369  in OMRON Corp ADR on December 30, 2024 and sell it today you would lose (478.00) from holding OMRON Corp ADR or give up 14.19% of portfolio value over 90 days.

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

Salesforce  vs.  OMRON Corp ADR

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

OMRON Corp ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days OMRON Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Salesforce and OMRON Corp

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

The idea behind Salesforce and OMRON Corp ADR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.