Correlation Between Salesforce and Computershare

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

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

Diversification Opportunities for Salesforce and Computershare

0.7

Correlation Coefficient

Salesforce  Computershare

Poor diversification

The 3 months correlation between Salesforce and Computershare is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Computershare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare Limited 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 Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare Limited has no effect on the direction of Salesforce i.e., Salesforce and Computershare go up and down completely randomly.

Pair Corralation between Salesforce and Computershare

Assuming the 90 days trading horizon Salesforce is expected to generate 1.15 times more return on investment than Computershare. However, Salesforce is 1.15 times more volatile than Computershare Limited. It trades about 0.26 of its potential returns per unit of risk. Computershare Limited is currently generating about 0.11 per unit of risk. If you would invest  22,896  in Salesforce on September 1, 2024 and sell it today you would earn a total of  8,509  from holding Salesforce or generate 37.16% return on investment over 90 days.

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

Salesforce  vs.  Computershare Limited

Salesforce

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Computershare Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Computershare may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Salesforce and Computershare

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

The idea behind Salesforce and Computershare Limited 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..