Correlation Between SALESFORCE INC and Patterson Companies

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

Diversification Opportunities for SALESFORCE INC and Patterson Companies

0.03

Correlation Coefficient

SALESFORCE INC  Patterson Companies

Significant diversification

The 3 months correlation between SALESFORCE and Patterson is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SALESFORCE INC CDR and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of SALESFORCE INC i.e., SALESFORCE INC and Patterson Companies go up and down completely randomly.

Pair Corralation between SALESFORCE INC and Patterson Companies

Assuming the 90 days trading horizon SALESFORCE INC is expected to generate 3.05 times less return on investment than Patterson Companies. But when comparing it to its historical volatility, SALESFORCE INC CDR is 1.44 times less risky than Patterson Companies. It trades about 0.08 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,970  in Patterson Companies on October 24, 2024 and sell it today you would earn a total of  990.00  from holding Patterson Companies or generate 50.25% return on investment over 90 days.

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

SALESFORCE INC CDR  vs.  Patterson Companies

SALESFORCE INC CDR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SALESFORCE INC CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, SALESFORCE INC reported solid returns over the last few months and may actually be approaching a breakup point.

Patterson Companies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Patterson Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SALESFORCE INC and Patterson Companies

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

The idea behind SALESFORCE INC CDR and Patterson Companies 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.