Correlation Between Salesforce and Standard Bank

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

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

Diversification Opportunities for Salesforce and Standard Bank

0.85

Correlation Coefficient

Salesforce  Standard Bank

Very poor diversification

The 3 months correlation between Salesforce and Standard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Standard Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Bank Group 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 Standard Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Bank Group has no effect on the direction of Salesforce i.e., Salesforce and Standard Bank go up and down completely randomly.

Pair Corralation between Salesforce and Standard Bank

Considering the 90-day investment horizon Salesforce is expected to generate 1.5 times more return on investment than Standard Bank. However, Salesforce is 1.5 times more volatile than Standard Bank Group. It trades about 0.27 of its potential returns per unit of risk. Standard Bank Group is currently generating about 0.09 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	Strong
Accuracy	100.0%
Values	Daily Returns

Salesforce  vs.  Standard Bank Group

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.

Standard Bank Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Standard Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Salesforce and Standard Bank

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

The idea behind Salesforce and Standard Bank Group 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.