Correlation Between Salesforce and USCorp

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

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

Diversification Opportunities for Salesforce and USCorp

0.06

Correlation Coefficient

Salesforce  USCorp

Significant diversification

The 3 months correlation between Salesforce and USCorp is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and USCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCorp 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 USCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCorp has no effect on the direction of Salesforce i.e., Salesforce and USCorp go up and down completely randomly.

Pair Corralation between Salesforce and USCorp

Considering the 90-day investment horizon Salesforce is expected to generate 6.66 times less return on investment than USCorp. But when comparing it to its historical volatility, Salesforce is 5.71 times less risky than USCorp. It trades about 0.11 of its potential returns per unit of risk. USCorp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.01  in USCorp on October 23, 2024 and sell it today you would earn a total of  0.01  from holding USCorp or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Salesforce  vs.  USCorp

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.

USCorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in USCorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, USCorp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and USCorp

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

The idea behind Salesforce and USCorp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.