Correlation Between M Split and Salesforce

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

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

Diversification Opportunities for M Split and Salesforce

0.81

Correlation Coefficient

M Split  Salesforce

Very poor diversification

The 3 months correlation between XMF-PB and Salesforce is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding M Split Corp and SalesforceCom CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalesforceCom CDR and M Split 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 M Split Corp 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 SalesforceCom CDR has no effect on the direction of M Split i.e., M Split and Salesforce go up and down completely randomly.

Pair Corralation between M Split and Salesforce

Assuming the 90 days trading horizon M Split is expected to generate 3.6 times less return on investment than Salesforce. But when comparing it to its historical volatility, M Split Corp is 3.49 times less risky than Salesforce. It trades about 0.18 of its potential returns per unit of risk. SalesforceCom CDR is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,110  in SalesforceCom CDR on September 23, 2024 and sell it today you would earn a total of  625.00  from holding SalesforceCom CDR or generate 29.62% return on investment over 90 days.

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

M Split Corp  vs.  SalesforceCom CDR

M Split Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M Split Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, M Split may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SalesforceCom CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M Split and Salesforce

The main advantage of trading using opposite M Split and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Split 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 M Split Corp and SalesforceCom 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.