Correlation Between Salesforce and Solution Financial

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

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

Diversification Opportunities for Salesforce and Solution Financial

-0.47

Correlation Coefficient

Salesforce  Solution Financial

Very good diversification

The 3 months correlation between Salesforce and Solution is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Salesforce i.e., Salesforce and Solution Financial go up and down completely randomly.

Pair Corralation between Salesforce and Solution Financial

Considering the 90-day investment horizon Salesforce is expected to under-perform the Solution Financial. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 2.1 times less risky than Solution Financial. The stock trades about -0.23 of its potential returns per unit of risk. The Solution Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Solution Financial on October 11, 2024 and sell it today you would earn a total of  1.00  from holding Solution Financial or generate 3.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Salesforce  vs.  Solution Financial

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.

Solution Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Solution Financial 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 Solution Financial

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

The idea behind Salesforce and Solution Financial 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.