Correlation Between Salesforce and Genius Sports

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

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

Diversification Opportunities for Salesforce and Genius Sports

0.64

Correlation Coefficient

Salesforce  Genius Sports

Poor diversification

The 3 months correlation between Salesforce and Genius is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Genius Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genius Sports 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 Genius Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genius Sports has no effect on the direction of Salesforce i.e., Salesforce and Genius Sports go up and down completely randomly.

Pair Corralation between Salesforce and Genius Sports

Considering the 90-day investment horizon Salesforce is expected to generate 1.26 times less return on investment than Genius Sports. But when comparing it to its historical volatility, Salesforce is 1.99 times less risky than Genius Sports. It trades about 0.27 of its potential returns per unit of risk. Genius Sports is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  717.00  in Genius Sports on September 2, 2024 and sell it today you would earn a total of  287.00  from holding Genius Sports or generate 40.03% return on investment over 90 days.

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

Salesforce  vs.  Genius Sports

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 unsteady basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Genius Sports

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Genius Sports are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Genius Sports demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Genius Sports

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

The idea behind Salesforce and Genius Sports 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.