Correlation Between Salesforce and ArcBest

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

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

Diversification Opportunities for Salesforce and ArcBest

0.6

Correlation Coefficient

Salesforce  ArcBest

Poor diversification

The 3 months correlation between Salesforce and ArcBest is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and ArcBest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcBest 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 ArcBest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcBest has no effect on the direction of Salesforce i.e., Salesforce and ArcBest go up and down completely randomly.

Pair Corralation between Salesforce and ArcBest

Assuming the 90 days trading horizon Salesforce is expected to generate 1.27 times more return on investment than ArcBest. However, Salesforce is 1.27 times more volatile than ArcBest. It trades about 0.08 of its potential returns per unit of risk. ArcBest is currently generating about -0.47 per unit of risk. If you would invest  31,368  in Salesforce on September 30, 2024 and sell it today you would earn a total of  1,017  from holding Salesforce or generate 3.24% return on investment over 90 days.

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

Salesforce  vs.  ArcBest

Salesforce

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

ArcBest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcBest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Salesforce and ArcBest

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

The idea behind Salesforce and ArcBest 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.