Correlation Between Salesforce and PETROLEOS

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

By analyzing existing cross correlation between Salesforce and PETROLEOS MEXICANOS 6375, you can compare the effects of market volatilities on Salesforce and PETROLEOS 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 PETROLEOS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and PETROLEOS.

Diversification Opportunities for Salesforce and PETROLEOS

0.26

Correlation Coefficient

Salesforce  PETROLEOS

Modest diversification

The 3 months correlation between Salesforce and PETROLEOS is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and PETROLEOS MEXICANOS 6375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PETROLEOS MEXICANOS 6375 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 PETROLEOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PETROLEOS MEXICANOS 6375 has no effect on the direction of Salesforce i.e., Salesforce and PETROLEOS go up and down completely randomly.

Pair Corralation between Salesforce and PETROLEOS

Considering the 90-day investment horizon Salesforce is expected to generate 1.0 times more return on investment than PETROLEOS. However, Salesforce is 1.0 times less risky than PETROLEOS. It trades about -0.04 of its potential returns per unit of risk. PETROLEOS MEXICANOS 6375 is currently generating about -0.09 per unit of risk. If you would invest  32,961  in Salesforce on November 29, 2024 and sell it today you would lose (2,228) from holding Salesforce or give up 6.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Salesforce  vs.  PETROLEOS MEXICANOS 6375

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

PETROLEOS MEXICANOS 6375

Risk-Adjusted Performance

Very Weak

Over the last 90 days PETROLEOS MEXICANOS 6375 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 PETROLEOS MEXICANOS 6375 investors.

Pair Trading with Salesforce and PETROLEOS

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

The idea behind Salesforce and PETROLEOS MEXICANOS 6375 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.