Correlation Between Salesforce and SpringWorks Therapeutics

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

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

Diversification Opportunities for Salesforce and SpringWorks Therapeutics

-0.17

Correlation Coefficient

Salesforce  SpringWorks Therapeutics

Good diversification

The 3 months correlation between Salesforce and SpringWorks is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and SpringWorks Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpringWorks Therapeutics 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 SpringWorks Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpringWorks Therapeutics has no effect on the direction of Salesforce i.e., Salesforce and SpringWorks Therapeutics go up and down completely randomly.

Pair Corralation between Salesforce and SpringWorks Therapeutics

Considering the 90-day investment horizon Salesforce is expected to generate 1.98 times less return on investment than SpringWorks Therapeutics. But when comparing it to its historical volatility, Salesforce is 2.35 times less risky than SpringWorks Therapeutics. It trades about 0.1 of its potential returns per unit of risk. SpringWorks Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,952  in SpringWorks Therapeutics on November 19, 2024 and sell it today you would earn a total of  1,791  from holding SpringWorks Therapeutics or generate 45.32% return on investment over 90 days.

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

Salesforce  vs.  SpringWorks Therapeutics

Salesforce

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SpringWorks Therapeutics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SpringWorks Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SpringWorks Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and SpringWorks Therapeutics

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

The idea behind Salesforce and SpringWorks Therapeutics 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.