Correlation Between SALESFORCE INC and American Financial

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

Diversification Opportunities for SALESFORCE INC and American Financial

0.88

Correlation Coefficient

SALESFORCE INC  American Financial

Very poor diversification

The 3 months correlation between SALESFORCE and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SALESFORCE INC CDR and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial 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 American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of SALESFORCE INC i.e., SALESFORCE INC and American Financial go up and down completely randomly.

Pair Corralation between SALESFORCE INC and American Financial

Assuming the 90 days trading horizon SALESFORCE INC CDR is expected to generate 1.72 times more return on investment than American Financial. However, SALESFORCE INC is 1.72 times more volatile than American Financial Group. It trades about 0.06 of its potential returns per unit of risk. American Financial Group is currently generating about 0.05 per unit of risk. If you would invest  990.00  in SALESFORCE INC CDR on October 5, 2024 and sell it today you would earn a total of  750.00  from holding SALESFORCE INC CDR or generate 75.76% return on investment over 90 days.

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

SALESFORCE INC CDR  vs.  American Financial Group

SALESFORCE INC CDR

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days SALESFORCE INC CDR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, SALESFORCE INC reported solid returns over the last few months and may actually be approaching a breakup point.

American Financial

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days American Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, American Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SALESFORCE INC and American Financial

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

The idea behind SALESFORCE INC CDR and American Financial 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 Stocks Directory module to find actively traded stocks across global markets.