Correlation Between Salesforce and THORNEY TECHS

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

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

Diversification Opportunities for Salesforce and THORNEY TECHS

0.18

Correlation Coefficient

Salesforce  THORNEY TECHS

Average diversification

The 3 months correlation between Salesforce and THORNEY is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and THORNEY TECHS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THORNEY TECHS LTD 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 THORNEY TECHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THORNEY TECHS LTD has no effect on the direction of Salesforce i.e., Salesforce and THORNEY TECHS go up and down completely randomly.

Pair Corralation between Salesforce and THORNEY TECHS

Assuming the 90 days trading horizon Salesforce is expected to generate 0.39 times more return on investment than THORNEY TECHS. However, Salesforce is 2.56 times less risky than THORNEY TECHS. It trades about 0.16 of its potential returns per unit of risk. THORNEY TECHS LTD is currently generating about 0.05 per unit of risk. If you would invest  23,497  in Salesforce on September 21, 2024 and sell it today you would earn a total of  9,293  from holding Salesforce or generate 39.55% return on investment over 90 days.

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

Salesforce  vs.  THORNEY TECHS LTD

Salesforce

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

THORNEY TECHS LTD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in THORNEY TECHS LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, THORNEY TECHS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Salesforce and THORNEY TECHS

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

The idea behind Salesforce and THORNEY TECHS LTD 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.