Correlation Between Salesforce and Makita

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

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

Diversification Opportunities for Salesforce and Makita

-0.18

Correlation Coefficient

Salesforce  Makita

Good diversification

The 3 months correlation between Salesforce and Makita is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita 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 Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of Salesforce i.e., Salesforce and Makita go up and down completely randomly.

Pair Corralation between Salesforce and Makita

Assuming the 90 days trading horizon Salesforce is expected to generate 2.01 times less return on investment than Makita. But when comparing it to its historical volatility, Salesforce is 2.67 times less risky than Makita. It trades about 0.09 of its potential returns per unit of risk. Makita is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  722.00  in Makita on October 11, 2024 and sell it today you would earn a total of  2,062  from holding Makita or generate 285.6% return on investment over 90 days.

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

Salesforce  vs.  Makita

Salesforce

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 11 (%) 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.

Makita

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Makita 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 Makita

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

The idea behind Salesforce and Makita 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.