Correlation Between Salesforce and CHURCH

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

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

Diversification Opportunities for Salesforce and CHURCH

0.23

Correlation Coefficient

Salesforce  CHURCH

Modest diversification

The 3 months correlation between Salesforce and CHURCH is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and CHURCH DWIGHT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHURCH DWIGHT INC 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 CHURCH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHURCH DWIGHT INC has no effect on the direction of Salesforce i.e., Salesforce and CHURCH go up and down completely randomly.

Pair Corralation between Salesforce and CHURCH

Considering the 90-day investment horizon Salesforce is expected to generate 1.6 times more return on investment than CHURCH. However, Salesforce is 1.6 times more volatile than CHURCH DWIGHT INC. It trades about 0.1 of its potential returns per unit of risk. CHURCH DWIGHT INC is currently generating about -0.09 per unit of risk. If you would invest  29,131  in Salesforce on October 12, 2024 and sell it today you would earn a total of  3,559  from holding Salesforce or generate 12.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	44.26%
Values	Daily Returns

Salesforce  vs.  CHURCH DWIGHT INC

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.

CHURCH DWIGHT INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHURCH DWIGHT INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CHURCH DWIGHT INC investors.

Pair Trading with Salesforce and CHURCH

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

The idea behind Salesforce and CHURCH DWIGHT INC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.