Correlation Between Salesforce and Vanguard Extended

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

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

Diversification Opportunities for Salesforce and Vanguard Extended

0.7

Correlation Coefficient

Salesforce  Vanguard Extended

Poor diversification

The 3 months correlation between Salesforce and Vanguard is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market 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 Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Salesforce i.e., Salesforce and Vanguard Extended go up and down completely randomly.

Pair Corralation between Salesforce and Vanguard Extended

Considering the 90-day investment horizon Salesforce is expected to under-perform the Vanguard Extended. In addition to that, Salesforce is 1.38 times more volatile than Vanguard Extended Market. It trades about -0.18 of its total potential returns per unit of risk. Vanguard Extended Market is currently generating about -0.11 per unit of volatility. If you would invest  14,408  in Vanguard Extended Market on December 31, 2024 and sell it today you would lose (1,283) from holding Vanguard Extended Market or give up 8.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Salesforce  vs.  Vanguard Extended Market

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Vanguard Extended Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Extended Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Salesforce and Vanguard Extended

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

The idea behind Salesforce and Vanguard Extended Market 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.