Correlation Between Salesforce and TC Energy

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

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

Diversification Opportunities for Salesforce and TC Energy

0.79

Correlation Coefficient

Salesforce  TC Energy

Poor diversification

The 3 months correlation between Salesforce and TRP-PA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SalesforceCom CDR and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Salesforce i.e., Salesforce and TC Energy go up and down completely randomly.

Pair Corralation between Salesforce and TC Energy

Assuming the 90 days trading horizon SalesforceCom CDR is expected to generate 3.35 times more return on investment than TC Energy. However, Salesforce is 3.35 times more volatile than TC Energy Corp. It trades about 0.03 of its potential returns per unit of risk. TC Energy Corp is currently generating about 0.02 per unit of risk. If you would invest  2,701  in SalesforceCom CDR on September 25, 2024 and sell it today you would earn a total of  24.00  from holding SalesforceCom CDR or generate 0.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

SalesforceCom CDR  vs.  TC Energy Corp

SalesforceCom CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 13 (%) 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.

TC Energy Corp

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Salesforce and TC Energy

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

The idea behind SalesforceCom CDR and TC Energy Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.