Correlation Between Salesforce and PennantPark Investment

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

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

Diversification Opportunities for Salesforce and PennantPark Investment

0.41

Correlation Coefficient

Salesforce  PennantPark Investment

Very weak diversification

The 3 months correlation between Salesforce and PennantPark is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Salesforce i.e., Salesforce and PennantPark Investment go up and down completely randomly.

Pair Corralation between Salesforce and PennantPark Investment

Assuming the 90 days trading horizon Salesforce is expected to under-perform the PennantPark Investment. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 2.38 times less risky than PennantPark Investment. The stock trades about -0.07 of its potential returns per unit of risk. The PennantPark Investment is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  660.00  in PennantPark Investment on October 26, 2024 and sell it today you would lose (2.00) from holding PennantPark Investment or give up 0.3% of portfolio value over 90 days.

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

Salesforce  vs.  PennantPark Investment

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. In spite of comparatively fragile basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

PennantPark Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PennantPark Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Salesforce and PennantPark Investment

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

The idea behind Salesforce and PennantPark Investment 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.