Correlation Between SALESFORCE INC and CHINA EDUCATION

Can any of the company-specific risk be diversified away by investing in both SALESFORCE INC and CHINA EDUCATION 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 CHINA EDUCATION 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 CHINA EDUCATION GROUP, you can compare the effects of market volatilities on SALESFORCE INC and CHINA EDUCATION 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 CHINA EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of SALESFORCE INC and CHINA EDUCATION.

Diversification Opportunities for SALESFORCE INC and CHINA EDUCATION

-0.84

Correlation Coefficient

SALESFORCE INC  CHINA EDUCATION

Pay attention - limited upside

The 3 months correlation between SALESFORCE and CHINA is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding SALESFORCE INC CDR and CHINA EDUCATION GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EDUCATION GROUP 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 CHINA EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EDUCATION GROUP has no effect on the direction of SALESFORCE INC i.e., SALESFORCE INC and CHINA EDUCATION go up and down completely randomly.

Pair Corralation between SALESFORCE INC and CHINA EDUCATION

Assuming the 90 days trading horizon SALESFORCE INC CDR is expected to generate 1.75 times more return on investment than CHINA EDUCATION. However, SALESFORCE INC is 1.75 times more volatile than CHINA EDUCATION GROUP. It trades about 0.01 of its potential returns per unit of risk. CHINA EDUCATION GROUP is currently generating about -0.15 per unit of risk. If you would invest  1,797  in SALESFORCE INC CDR on September 27, 2024 and sell it today you would lose (17.00) from holding SALESFORCE INC CDR or give up 0.95% of portfolio value over 90 days.

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

SALESFORCE INC CDR  vs.  CHINA EDUCATION GROUP

SALESFORCE INC CDR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SALESFORCE INC CDR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SALESFORCE INC reported solid returns over the last few months and may actually be approaching a breakup point.

CHINA EDUCATION GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SALESFORCE INC and CHINA EDUCATION

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

The idea behind SALESFORCE INC CDR and CHINA EDUCATION GROUP 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.