Correlation Between Salesforce and G8 Education

Can any of the company-specific risk be diversified away by investing in both Salesforce and G8 Education 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 G8 Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Salesforce and G8 Education, you can compare the effects of market volatilities on Salesforce and G8 Education 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 G8 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and G8 Education.

Diversification Opportunities for Salesforce and G8 Education

0.33

Correlation Coefficient

Salesforce  G8 Education

Weak diversification

The 3 months correlation between Salesforce and GEM is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and G8 Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 Education 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 G8 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 Education has no effect on the direction of Salesforce i.e., Salesforce and G8 Education go up and down completely randomly.

Pair Corralation between Salesforce and G8 Education

Considering the 90-day investment horizon Salesforce is expected to generate 1.1 times more return on investment than G8 Education. However, Salesforce is 1.1 times more volatile than G8 Education. It trades about 0.25 of its potential returns per unit of risk. G8 Education is currently generating about 0.07 per unit of risk. If you would invest  25,250  in Salesforce on August 30, 2024 and sell it today you would earn a total of  7,751  from holding Salesforce or generate 30.7% return on investment over 90 days.

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

Salesforce  vs.  G8 Education

Salesforce

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 19 (%) 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.

G8 Education

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in G8 Education are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, G8 Education may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Salesforce and G8 Education

The main advantage of trading using opposite Salesforce and G8 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, G8 Education 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 G8 Education will offset losses from the drop in G8 Education's long position.

The idea behind Salesforce and G8 Education 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.