Correlation Between Micron Technology and Salesforce

Can any of the company-specific risk be diversified away by investing in both Micron Technology and Salesforce 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 Micron Technology and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Micron Technology and Salesforce, you can compare the effects of market volatilities on Micron Technology and Salesforce 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 Micron Technology with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Salesforce.

Diversification Opportunities for Micron Technology and Salesforce

0.67

Correlation Coefficient

Micron Technology  Salesforce

Poor diversification

The 3 months correlation between Micron and Salesforce is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Micron Technology 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 Micron Technology are associated (or correlated) with Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Micron Technology i.e., Micron Technology and Salesforce go up and down completely randomly.

Pair Corralation between Micron Technology and Salesforce

Assuming the 90 days trading horizon Micron Technology is expected to generate 1.95 times less return on investment than Salesforce. In addition to that, Micron Technology is 1.65 times more volatile than Salesforce. It trades about 0.08 of its total potential returns per unit of risk. Salesforce is currently generating about 0.26 per unit of volatility. If you would invest  22,716  in Salesforce on September 3, 2024 and sell it today you would earn a total of  8,689  from holding Salesforce or generate 38.25% return on investment over 90 days.

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

Micron Technology  vs.  Salesforce

Micron Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Salesforce

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Salesforce

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

The idea behind Micron Technology and Salesforce 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.