Correlation Between Salesforce and Snowflake

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

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

Diversification Opportunities for Salesforce and Snowflake

0.82

Correlation Coefficient

Salesforce  Snowflake

Very poor diversification

The 3 months correlation between Salesforce and Snowflake is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake 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 Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of Salesforce i.e., Salesforce and Snowflake go up and down completely randomly.

Pair Corralation between Salesforce and Snowflake

Assuming the 90 days horizon Salesforce is expected to generate 0.7 times more return on investment than Snowflake. However, Salesforce is 1.43 times less risky than Snowflake. It trades about -0.23 of its potential returns per unit of risk. Snowflake is currently generating about -0.28 per unit of risk. If you would invest  33,460  in Salesforce on October 10, 2024 and sell it today you would lose (2,075) from holding Salesforce or give up 6.2% of portfolio value over 90 days.

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

Salesforce  vs.  Snowflake

Salesforce

Risk-Adjusted Performance

10 of 100

OK

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

Snowflake

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Snowflake are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Snowflake reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Snowflake

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

The idea behind Salesforce and Snowflake 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.