Correlation Between SALESFORCE INC and Exxon Mobil

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

Diversification Opportunities for SALESFORCE INC and Exxon Mobil

-0.02

Correlation Coefficient

SALESFORCE INC  Exxon Mobil

Good diversification

The 3 months correlation between SALESFORCE and Exxon is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SALESFORCE INC CDR and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon Mobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of SALESFORCE INC i.e., SALESFORCE INC and Exxon Mobil go up and down completely randomly.

Pair Corralation between SALESFORCE INC and Exxon Mobil

Assuming the 90 days trading horizon SALESFORCE INC CDR is expected to under-perform the Exxon Mobil. In addition to that, SALESFORCE INC is 1.95 times more volatile than Exxon Mobil. It trades about -0.43 of its total potential returns per unit of risk. Exxon Mobil is currently generating about -0.17 per unit of volatility. If you would invest  10,856  in Exxon Mobil on October 5, 2024 and sell it today you would lose (380.00) from holding Exxon Mobil or give up 3.5% of portfolio value over 90 days.

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

SALESFORCE INC CDR  vs.  Exxon Mobil

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.

Exxon Mobil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxon Mobil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SALESFORCE INC and Exxon Mobil

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

The idea behind SALESFORCE INC CDR and Exxon Mobil 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.