Correlation Between Salesforce and RCM TECHNOLOGIES

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

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

Diversification Opportunities for Salesforce and RCM TECHNOLOGIES

0.86

Correlation Coefficient

Salesforce  RCM TECHNOLOGIES

Very poor diversification

The 3 months correlation between Salesforce and RCM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and RCM TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM TECHNOLOGIES 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 RCM TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCM TECHNOLOGIES has no effect on the direction of Salesforce i.e., Salesforce and RCM TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Salesforce and RCM TECHNOLOGIES

Assuming the 90 days trading horizon Salesforce is expected to generate 1.02 times less return on investment than RCM TECHNOLOGIES. But when comparing it to its historical volatility, Salesforce is 1.8 times less risky than RCM TECHNOLOGIES. It trades about 0.08 of its potential returns per unit of risk. RCM TECHNOLOGIES is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,310  in RCM TECHNOLOGIES on October 5, 2024 and sell it today you would earn a total of  850.00  from holding RCM TECHNOLOGIES or generate 64.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Salesforce  vs.  RCM TECHNOLOGIES

Salesforce

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

RCM TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days RCM TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, RCM TECHNOLOGIES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and RCM TECHNOLOGIES

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

The idea behind Salesforce and RCM TECHNOLOGIES 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.