Correlation Between SALESFORCE INC and Aqua America

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

By analyzing existing cross correlation between SALESFORCE INC CDR and Aqua America, you can compare the effects of market volatilities on SALESFORCE INC and Aqua America 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 INC with a short position of Aqua America. Check out your portfolio center. Please also check ongoing floating volatility patterns of SALESFORCE INC and Aqua America.

Diversification Opportunities for SALESFORCE INC and Aqua America

0.41

Correlation Coefficient

SALESFORCE INC  Aqua America

Very weak diversification

The 3 months correlation between SALESFORCE and Aqua is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding SALESFORCE INC CDR and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America and SALESFORCE INC 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 INC CDR are associated (or correlated) with Aqua America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua America has no effect on the direction of SALESFORCE INC i.e., SALESFORCE INC and Aqua America go up and down completely randomly.

Pair Corralation between SALESFORCE INC and Aqua America

Assuming the 90 days trading horizon SALESFORCE INC CDR is expected to generate 2.1 times more return on investment than Aqua America. However, SALESFORCE INC is 2.1 times more volatile than Aqua America. It trades about 0.09 of its potential returns per unit of risk. Aqua America is currently generating about -0.01 per unit of risk. If you would invest  1,517  in SALESFORCE INC CDR on October 11, 2024 and sell it today you would earn a total of  253.00  from holding SALESFORCE INC CDR or generate 16.68% return on investment over 90 days.

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

SALESFORCE INC CDR  vs.  Aqua America

SALESFORCE INC CDR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SALESFORCE INC CDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SALESFORCE INC reported solid returns over the last few months and may actually be approaching a breakup point.

Aqua America

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SALESFORCE INC and Aqua America

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

The idea behind SALESFORCE INC CDR and Aqua America 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.