Correlation Between Salesforce and AKITA Drilling

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

By analyzing existing cross correlation between SalesforceCom CDR and AKITA Drilling, you can compare the effects of market volatilities on Salesforce and AKITA Drilling 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 AKITA Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and AKITA Drilling.

Diversification Opportunities for Salesforce and AKITA Drilling

0.77

Correlation Coefficient

Salesforce  AKITA Drilling

Poor diversification

The 3 months correlation between Salesforce and AKITA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SalesforceCom CDR and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling 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 SalesforceCom CDR are associated (or correlated) with AKITA Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKITA Drilling has no effect on the direction of Salesforce i.e., Salesforce and AKITA Drilling go up and down completely randomly.

Pair Corralation between Salesforce and AKITA Drilling

Assuming the 90 days trading horizon SalesforceCom CDR is expected to generate 0.84 times more return on investment than AKITA Drilling. However, SalesforceCom CDR is 1.19 times less risky than AKITA Drilling. It trades about 0.17 of its potential returns per unit of risk. AKITA Drilling is currently generating about 0.1 per unit of risk. If you would invest  1,854  in SalesforceCom CDR on September 12, 2024 and sell it today you would earn a total of  923.00  from holding SalesforceCom CDR or generate 49.78% return on investment over 90 days.

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

SalesforceCom CDR  vs.  AKITA Drilling

SalesforceCom CDR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

AKITA Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, AKITA Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and AKITA Drilling

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

The idea behind SalesforceCom CDR and AKITA Drilling 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.