Correlation Between Salesforce and Aqr Small

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

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

Diversification Opportunities for Salesforce and Aqr Small

0.18

Correlation Coefficient

Salesforce  Aqr Small

Average diversification

The 3 months correlation between Salesforce and Aqr is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Aqr Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Small Cap 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 Aqr Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Small Cap has no effect on the direction of Salesforce i.e., Salesforce and Aqr Small go up and down completely randomly.

Pair Corralation between Salesforce and Aqr Small

Considering the 90-day investment horizon Salesforce is expected to under-perform the Aqr Small. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.01 times less risky than Aqr Small. The stock trades about -0.1 of its potential returns per unit of risk. The Aqr Small Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,740  in Aqr Small Cap on October 26, 2024 and sell it today you would earn a total of  26.00  from holding Aqr Small Cap or generate 1.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Salesforce  vs.  Aqr Small Cap

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.

Aqr Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aqr Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and Aqr Small

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

The idea behind Salesforce and Aqr Small Cap 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.