Correlation Between Salesforce and Philip Morris

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

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

Diversification Opportunities for Salesforce and Philip Morris

-0.5

Correlation Coefficient

Salesforce  Philip Morris

Very good diversification

The 3 months correlation between Salesforce and Philip is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern 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 Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Salesforce i.e., Salesforce and Philip Morris go up and down completely randomly.

Pair Corralation between Salesforce and Philip Morris

Considering the 90-day investment horizon Salesforce is expected to under-perform the Philip Morris. In addition to that, Salesforce is 1.23 times more volatile than Philip Morris International. It trades about -0.07 of its total potential returns per unit of risk. Philip Morris International is currently generating about 0.18 per unit of volatility. If you would invest  12,958  in Philip Morris International on December 1, 2024 and sell it today you would earn a total of  2,570  from holding Philip Morris International or generate 19.83% 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.  Philip Morris International

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Philip Morris Intern

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Philip Morris displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Philip Morris

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

The idea behind Salesforce and Philip Morris International 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.