Correlation Between Salesforce and Social Life

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

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

Diversification Opportunities for Salesforce and Social Life

-0.4

Correlation Coefficient

Salesforce  Social Life

Very good diversification

The 3 months correlation between Salesforce and Social is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Social Life Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Social Life Network 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 Social Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Social Life Network has no effect on the direction of Salesforce i.e., Salesforce and Social Life go up and down completely randomly.

Pair Corralation between Salesforce and Social Life

Considering the 90-day investment horizon Salesforce is expected to generate 2.99 times less return on investment than Social Life. But when comparing it to its historical volatility, Salesforce is 12.66 times less risky than Social Life. It trades about 0.28 of its potential returns per unit of risk. Social Life Network is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Social Life Network on September 4, 2024 and sell it today you would lose (0.02) from holding Social Life Network or give up 40.0% of portfolio value over 90 days.

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

Salesforce  vs.  Social Life Network

Salesforce

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 21 (%) 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.

Social Life Network

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Social Life Network are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, Social Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Social Life

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

The idea behind Salesforce and Social Life Network 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 Stocks Directory module to find actively traded stocks across global markets.