Correlation Between Salesforce and AECI

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

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

Diversification Opportunities for Salesforce and AECI

0.21

Correlation Coefficient

Salesforce  AECI

Modest diversification

The 3 months correlation between Salesforce and AECI is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and AECI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECI 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 Salesforce are associated (or correlated) with AECI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECI has no effect on the direction of Salesforce i.e., Salesforce and AECI go up and down completely randomly.

Pair Corralation between Salesforce and AECI

Considering the 90-day investment horizon Salesforce is expected to generate 1.25 times more return on investment than AECI. However, Salesforce is 1.25 times more volatile than AECI. It trades about 0.27 of its potential returns per unit of risk. AECI is currently generating about 0.02 per unit of risk. If you would invest  24,767  in Salesforce on September 3, 2024 and sell it today you would earn a total of  8,232  from holding Salesforce or generate 33.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Salesforce  vs.  AECI

Salesforce

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

AECI

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AECI are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AECI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Salesforce and AECI

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

The idea behind Salesforce and AECI 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.

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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.