Correlation Between Aluminumof China and Salesforce

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

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

Diversification Opportunities for Aluminumof China and Salesforce

0.41

Correlation Coefficient

Aluminumof China  Salesforce

Very weak diversification

The 3 months correlation between Aluminumof and Salesforce is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and Salesforce go up and down completely randomly.

Pair Corralation between Aluminumof China and Salesforce

Assuming the 90 days horizon Aluminumof China is expected to generate 1.19 times less return on investment than Salesforce. In addition to that, Aluminumof China is 1.5 times more volatile than Salesforce. It trades about 0.14 of its total potential returns per unit of risk. Salesforce is currently generating about 0.24 per unit of volatility. If you would invest  27,040  in Salesforce on September 5, 2024 and sell it today you would earn a total of  4,245  from holding Salesforce or generate 15.7% return on investment over 90 days.

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

Aluminum of  vs.  Salesforce

Aluminumof China

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aluminumof China reported solid returns over the last few months and may actually be approaching a breakup point.

Salesforce

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aluminumof China and Salesforce

The main advantage of trading using opposite Aluminumof China and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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 Aluminum of 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .