Correlation Between Salesforce and Hitachi

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

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

Diversification Opportunities for Salesforce and Hitachi

0.32

Correlation Coefficient

Salesforce  Hitachi

Weak diversification

The 3 months correlation between Salesforce and Hitachi is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi 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 Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi has no effect on the direction of Salesforce i.e., Salesforce and Hitachi go up and down completely randomly.

Pair Corralation between Salesforce and Hitachi

Assuming the 90 days trading horizon Salesforce is expected to under-perform the Hitachi. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.31 times less risky than Hitachi. The stock trades about -0.15 of its potential returns per unit of risk. The Hitachi is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,430  in Hitachi on December 26, 2024 and sell it today you would lose (100.00) from holding Hitachi or give up 4.12% of portfolio value over 90 days.

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

Salesforce  vs.  Hitachi

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Hitachi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hitachi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hitachi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Salesforce and Hitachi

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

The idea behind Salesforce and Hitachi 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.