Correlation Between SALESFORCE INC and VULCAN MATERIALS

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

Diversification Opportunities for SALESFORCE INC and VULCAN MATERIALS

0.83

Correlation Coefficient

SALESFORCE INC  VULCAN MATERIALS

Very poor diversification

The 3 months correlation between SALESFORCE and VULCAN is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SALESFORCE INC CDR and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of SALESFORCE INC i.e., SALESFORCE INC and VULCAN MATERIALS go up and down completely randomly.

Pair Corralation between SALESFORCE INC and VULCAN MATERIALS

Assuming the 90 days trading horizon SALESFORCE INC CDR is expected to generate 1.61 times more return on investment than VULCAN MATERIALS. However, SALESFORCE INC is 1.61 times more volatile than VULCAN MATERIALS. It trades about 0.05 of its potential returns per unit of risk. VULCAN MATERIALS is currently generating about 0.06 per unit of risk. If you would invest  1,398  in SALESFORCE INC CDR on October 5, 2024 and sell it today you would earn a total of  342.00  from holding SALESFORCE INC CDR or generate 24.46% 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.  VULCAN MATERIALS

SALESFORCE INC CDR

Risk-Adjusted Performance

0 of 100

OK

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.

VULCAN MATERIALS

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days VULCAN MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, VULCAN MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SALESFORCE INC and VULCAN MATERIALS

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

The idea behind SALESFORCE INC CDR and VULCAN MATERIALS 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.