Correlation Between Salesforce and British American

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

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

Diversification Opportunities for Salesforce and British American

0.57

Correlation Coefficient

Salesforce  British American

Very weak diversification

The 3 months correlation between Salesforce and British is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding salesforce inc and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Salesforce 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 are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Salesforce i.e., Salesforce and British American go up and down completely randomly.

Pair Corralation between Salesforce and British American

Assuming the 90 days trading horizon salesforce inc is expected to generate 1.86 times more return on investment than British American. However, Salesforce is 1.86 times more volatile than British American Tobacco. It trades about 0.28 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.08 per unit of risk. If you would invest  6,480  in salesforce inc on September 12, 2024 and sell it today you would earn a total of  3,069  from holding salesforce inc or generate 47.36% return on investment over 90 days.

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

salesforce inc  vs.  British American Tobacco

salesforce inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in salesforce inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Salesforce sustained solid returns over the last few months and may actually be approaching a breakup point.

British American Tobacco

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, British American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and British American

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

The idea behind salesforce inc and British American Tobacco 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.