Correlation Between Salesforce and ARCA Oil

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Can any of the company-specific risk be diversified away by investing in both Salesforce and ARCA Oil 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 ARCA Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and ARCA Oil, you can compare the effects of market volatilities on Salesforce and ARCA Oil 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 ARCA Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and ARCA Oil.

Diversification Opportunities for Salesforce and ARCA Oil

SalesforceARCADiversified AwaySalesforceARCADiversified Away100%
-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Salesforce and ARCA is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and ARCA Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCA Oil 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 ARCA Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCA Oil has no effect on the direction of Salesforce i.e., Salesforce and ARCA Oil go up and down completely randomly.
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Pair Corralation between Salesforce and ARCA Oil

Considering the 90-day investment horizon Salesforce is expected to generate 1.97 times more return on investment than ARCA Oil. However, Salesforce is 1.97 times more volatile than ARCA Oil. It trades about 0.09 of its potential returns per unit of risk. ARCA Oil is currently generating about 0.02 per unit of risk. If you would invest  29,096  in Salesforce on October 21, 2024 and sell it today you would earn a total of  3,360  from holding Salesforce or generate 11.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Salesforce  vs.  ARCA Oil

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -1001020
JavaScript chart by amCharts 3.21.15CRM XOI
       Timeline  

Salesforce and ARCA Oil Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.74-5.05-3.36-1.660.01.713.485.247.018.78 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15CRM XOI
       Returns  

Pair Trading with Salesforce and ARCA Oil

The main advantage of trading using opposite Salesforce and ARCA Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, ARCA Oil 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 ARCA Oil will offset losses from the drop in ARCA Oil's long position.
The idea behind Salesforce and ARCA Oil 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.
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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