Correlation Between SALESFORCE INC and Norfolk Southern

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

Diversification Opportunities for SALESFORCE INC and Norfolk Southern

0.72

Correlation Coefficient

SALESFORCE INC  Norfolk Southern

Poor diversification

The 3 months correlation between SALESFORCE and Norfolk is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SALESFORCE INC CDR and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern 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 Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of SALESFORCE INC i.e., SALESFORCE INC and Norfolk Southern go up and down completely randomly.

Pair Corralation between SALESFORCE INC and Norfolk Southern

Assuming the 90 days trading horizon SALESFORCE INC CDR is expected to generate 1.58 times more return on investment than Norfolk Southern. However, SALESFORCE INC is 1.58 times more volatile than Norfolk Southern. It trades about 0.08 of its potential returns per unit of risk. Norfolk Southern is currently generating about 0.01 per unit of risk. If you would invest  757.00  in SALESFORCE INC CDR on September 23, 2024 and sell it today you would earn a total of  983.00  from holding SALESFORCE INC CDR or generate 129.85% return on investment over 90 days.

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

SALESFORCE INC CDR  vs.  Norfolk Southern

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 uncertain basic indicators, SALESFORCE INC reported solid returns over the last few months and may actually be approaching a breakup point.

Norfolk Southern

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Norfolk Southern are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Norfolk Southern is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SALESFORCE INC and Norfolk Southern

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

The idea behind SALESFORCE INC CDR and Norfolk Southern 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 Commodity Directory module to find actively traded commodities issued by global exchanges.