Correlation Between Salesforce and IDI SCA

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

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

Diversification Opportunities for Salesforce and IDI SCA

-0.47

Correlation Coefficient

Salesforce  IDI SCA

Very good diversification

The 3 months correlation between Salesforce and IDI is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and IDI SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDI SCA 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 IDI SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDI SCA has no effect on the direction of Salesforce i.e., Salesforce and IDI SCA go up and down completely randomly.

Pair Corralation between Salesforce and IDI SCA

Considering the 90-day investment horizon Salesforce is expected to generate 1.95 times more return on investment than IDI SCA. However, Salesforce is 1.95 times more volatile than IDI SCA. It trades about 0.27 of its potential returns per unit of risk. IDI SCA 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 Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Salesforce  vs.  IDI SCA

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.

IDI SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDI SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IDI SCA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and IDI SCA

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

The idea behind Salesforce and IDI SCA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.