Correlation Between Salesforce and Waters

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

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

Diversification Opportunities for Salesforce and Waters

0.73

Correlation Coefficient

Salesforce  Waters

Poor diversification

The 3 months correlation between Salesforce and Waters is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters 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 Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Salesforce i.e., Salesforce and Waters go up and down completely randomly.

Pair Corralation between Salesforce and Waters

Considering the 90-day investment horizon Salesforce is expected to generate 0.59 times more return on investment than Waters. However, Salesforce is 1.7 times less risky than Waters. It trades about 0.27 of its potential returns per unit of risk. Waters is currently generating about 0.08 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	Significant
Accuracy	100.0%
Values	Daily Returns

Salesforce  vs.  Waters

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.

Waters

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Waters

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

The idea behind Salesforce and Waters 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.