Correlation Between Salesforce and ALLTEL

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

By analyzing existing cross correlation between Salesforce and ALLTEL P 68, you can compare the effects of market volatilities on Salesforce and ALLTEL 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 ALLTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and ALLTEL.

Diversification Opportunities for Salesforce and ALLTEL

0.35

Correlation Coefficient

Salesforce  ALLTEL

Weak diversification

The 3 months correlation between Salesforce and ALLTEL is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and ALLTEL P 68 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLTEL P 68 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 ALLTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLTEL P 68 has no effect on the direction of Salesforce i.e., Salesforce and ALLTEL go up and down completely randomly.

Pair Corralation between Salesforce and ALLTEL

Considering the 90-day investment horizon Salesforce is expected to under-perform the ALLTEL. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.06 times less risky than ALLTEL. The stock trades about -0.28 of its potential returns per unit of risk. The ALLTEL P 68 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10,361  in ALLTEL P 68 on October 22, 2024 and sell it today you would earn a total of  124.00  from holding ALLTEL P 68 or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	44.44%
Values	Daily Returns

Salesforce  vs.  ALLTEL P 68

Salesforce

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 7 (%) 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.

ALLTEL P 68

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLTEL P 68 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALLTEL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and ALLTEL

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

The idea behind Salesforce and ALLTEL P 68 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.