Correlation Between Salesforce and UNITED

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

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

Diversification Opportunities for Salesforce and UNITED

-0.38

Correlation Coefficient

Salesforce  UNITED

Very good diversification

The 3 months correlation between Salesforce and UNITED is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and UNITED TECHNOLOGIES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED TECHNOLOGIES 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 UNITED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED TECHNOLOGIES has no effect on the direction of Salesforce i.e., Salesforce and UNITED go up and down completely randomly.

Pair Corralation between Salesforce and UNITED

Considering the 90-day investment horizon Salesforce is expected to generate 2.08 times more return on investment than UNITED. However, Salesforce is 2.08 times more volatile than UNITED TECHNOLOGIES P. It trades about 0.1 of its potential returns per unit of risk. UNITED TECHNOLOGIES P is currently generating about -0.07 per unit of risk. If you would invest  28,777  in Salesforce on October 11, 2024 and sell it today you would earn a total of  3,913  from holding Salesforce or generate 13.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Salesforce  vs.  UNITED TECHNOLOGIES P

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.

UNITED TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Salesforce and UNITED

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

The idea behind Salesforce and UNITED TECHNOLOGIES P 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.