Correlation Between Salesforce and Vertex Pharmaceuticals

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

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

Diversification Opportunities for Salesforce and Vertex Pharmaceuticals

-0.71

Correlation Coefficient

Salesforce  Vertex Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Salesforce and Vertex is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Vertex Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceuticals 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 Vertex Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Pharmaceuticals has no effect on the direction of Salesforce i.e., Salesforce and Vertex Pharmaceuticals go up and down completely randomly.

Pair Corralation between Salesforce and Vertex Pharmaceuticals

Considering the 90-day investment horizon Salesforce is expected to under-perform the Vertex Pharmaceuticals. In addition to that, Salesforce is 1.25 times more volatile than Vertex Pharmaceuticals. It trades about -0.18 of its total potential returns per unit of risk. Vertex Pharmaceuticals is currently generating about 0.24 per unit of volatility. If you would invest  39,935  in Vertex Pharmaceuticals on December 29, 2024 and sell it today you would earn a total of  9,334  from holding Vertex Pharmaceuticals or generate 23.37% return on investment over 90 days.

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

Salesforce  vs.  Vertex Pharmaceuticals

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Vertex Pharmaceuticals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Pharmaceuticals are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vertex Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Vertex Pharmaceuticals

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

The idea behind Salesforce and Vertex Pharmaceuticals 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.