Correlation Between Salesforce and Viva Leisure

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

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

Diversification Opportunities for Salesforce and Viva Leisure

0.28

Correlation Coefficient

Salesforce  Viva Leisure

Modest diversification

The 3 months correlation between Salesforce and Viva is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Viva Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viva Leisure 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 Viva Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viva Leisure has no effect on the direction of Salesforce i.e., Salesforce and Viva Leisure go up and down completely randomly.

Pair Corralation between Salesforce and Viva Leisure

Considering the 90-day investment horizon Salesforce is expected to generate 0.69 times more return on investment than Viva Leisure. However, Salesforce is 1.44 times less risky than Viva Leisure. It trades about 0.27 of its potential returns per unit of risk. Viva Leisure is currently generating about 0.01 per unit of risk. If you would invest  24,767  in Salesforce on August 31, 2024 and sell it today you would earn a total of  8,234  from holding Salesforce or generate 33.25% 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.  Viva Leisure

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.

Viva Leisure

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Viva Leisure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Viva Leisure is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Salesforce and Viva Leisure

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

The idea behind Salesforce and Viva Leisure 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.