Correlation Between Salesforce and Raytheon Technologies

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

By analyzing existing cross correlation between salesforce inc and Raytheon Technologies, you can compare the effects of market volatilities on Salesforce and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Raytheon Technologies.

Diversification Opportunities for Salesforce and Raytheon Technologies

0.66

Correlation Coefficient

Salesforce  Raytheon Technologies

Poor diversification

The 3 months correlation between Salesforce and Raytheon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding salesforce inc and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Salesforce i.e., Salesforce and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Salesforce and Raytheon Technologies

Assuming the 90 days trading horizon salesforce inc is expected to generate 1.65 times more return on investment than Raytheon Technologies. However, Salesforce is 1.65 times more volatile than Raytheon Technologies. It trades about 0.25 of its potential returns per unit of risk. Raytheon Technologies is currently generating about 0.12 per unit of risk. If you would invest  6,814  in salesforce inc on September 27, 2024 and sell it today you would earn a total of  2,916  from holding salesforce inc or generate 42.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

salesforce inc  vs.  Raytheon Technologies

salesforce inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in salesforce inc are ranked lower than 19 (%) 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.

Raytheon Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Salesforce and Raytheon Technologies

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

The idea behind salesforce inc and Raytheon Technologies 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.