Correlation Between VULCAN MATERIALS and SALESFORCE INC

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

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

Diversification Opportunities for VULCAN MATERIALS and SALESFORCE INC

0.83

Correlation Coefficient

VULCAN MATERIALS  SALESFORCE INC

Very poor diversification

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

Pair Corralation between VULCAN MATERIALS and SALESFORCE INC

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 1.22 times less return on investment than SALESFORCE INC. But when comparing it to its historical volatility, VULCAN MATERIALS is 1.61 times less risky than SALESFORCE INC. It trades about 0.06 of its potential returns per unit of risk. SALESFORCE INC CDR is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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

VULCAN MATERIALS  vs.  SALESFORCE INC CDR

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.

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.

Pair Trading with VULCAN MATERIALS and SALESFORCE INC

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

The idea behind VULCAN MATERIALS and SALESFORCE INC CDR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.