Correlation Between Salesforce and Whitecap Resources

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

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

Diversification Opportunities for Salesforce and Whitecap Resources

0.42

Correlation Coefficient

Salesforce  Whitecap Resources

Very weak diversification

The 3 months correlation between Salesforce and Whitecap is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Whitecap Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitecap Resources 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 Whitecap Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitecap Resources has no effect on the direction of Salesforce i.e., Salesforce and Whitecap Resources go up and down completely randomly.

Pair Corralation between Salesforce and Whitecap Resources

Considering the 90-day investment horizon Salesforce is expected to generate 1.2 times more return on investment than Whitecap Resources. However, Salesforce is 1.2 times more volatile than Whitecap Resources. It trades about 0.1 of its potential returns per unit of risk. Whitecap Resources is currently generating about 0.03 per unit of risk. If you would invest  13,502  in Salesforce on September 3, 2024 and sell it today you would earn a total of  19,497  from holding Salesforce or generate 144.4% return on investment over 90 days.

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

Salesforce  vs.  Whitecap Resources

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.

Whitecap Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Whitecap Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Whitecap Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and Whitecap Resources

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

The idea behind Salesforce and Whitecap Resources 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..