Correlation Between Salesforce and Sekisui House

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

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

Diversification Opportunities for Salesforce and Sekisui House

-0.62

Correlation Coefficient

Salesforce  Sekisui House

Excellent diversification

The 3 months correlation between Salesforce and Sekisui is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Sekisui House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui House 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 Sekisui House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui House has no effect on the direction of Salesforce i.e., Salesforce and Sekisui House go up and down completely randomly.

Pair Corralation between Salesforce and Sekisui House

Assuming the 90 days trading horizon Salesforce is expected to generate 1.29 times more return on investment than Sekisui House. However, Salesforce is 1.29 times more volatile than Sekisui House. It trades about 0.09 of its potential returns per unit of risk. Sekisui House is currently generating about 0.06 per unit of risk. If you would invest  19,343  in Salesforce on October 5, 2024 and sell it today you would earn a total of  12,897  from holding Salesforce or generate 66.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.68%
Values	Daily Returns

Salesforce  vs.  Sekisui House

Salesforce

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 13 (%) 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.

Sekisui House

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sekisui House has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Sekisui House 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 Sekisui House

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

The idea behind Salesforce and Sekisui House 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.