Correlation Between Salesforce and Simplify Equity

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

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

Diversification Opportunities for Salesforce and Simplify Equity

0.35

Correlation Coefficient

Salesforce  Simplify Equity

Weak diversification

The 3 months correlation between Salesforce and Simplify is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Salesforce i.e., Salesforce and Simplify Equity go up and down completely randomly.

Pair Corralation between Salesforce and Simplify Equity

Considering the 90-day investment horizon Salesforce is expected to under-perform the Simplify Equity. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.43 times less risky than Simplify Equity. The stock trades about -0.28 of its potential returns per unit of risk. The Simplify Equity PLUS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,190  in Simplify Equity PLUS on October 24, 2024 and sell it today you would earn a total of  134.00  from holding Simplify Equity PLUS or generate 3.2% return on investment over 90 days.

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

Salesforce  vs.  Simplify Equity PLUS

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.

Simplify Equity PLUS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Simplify Equity is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Salesforce and Simplify Equity

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

The idea behind Salesforce and Simplify Equity PLUS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.