Correlation Between FAST RETAIL and SALESFORCE INC

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

By analyzing existing cross correlation between FAST RETAIL ADR and SALESFORCE INC CDR, you can compare the effects of market volatilities on FAST RETAIL and SALESFORCE INC 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 FAST RETAIL with a short position of SALESFORCE INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and SALESFORCE INC.

Diversification Opportunities for FAST RETAIL and SALESFORCE INC

0.6

Correlation Coefficient

FAST RETAIL  SALESFORCE INC

Poor diversification

The 3 months correlation between FAST and SALESFORCE is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and SALESFORCE INC CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SALESFORCE INC CDR and FAST RETAIL 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 FAST RETAIL ADR are associated (or correlated) with SALESFORCE INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SALESFORCE INC CDR has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and SALESFORCE INC go up and down completely randomly.

Pair Corralation between FAST RETAIL and SALESFORCE INC

Assuming the 90 days trading horizon FAST RETAIL is expected to generate 1.83 times less return on investment than SALESFORCE INC. But when comparing it to its historical volatility, FAST RETAIL ADR is 1.63 times less risky than SALESFORCE INC. It trades about 0.16 of its potential returns per unit of risk. SALESFORCE INC CDR is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,327  in SALESFORCE INC CDR on September 13, 2024 and sell it today you would earn a total of  523.00  from holding SALESFORCE INC CDR or generate 39.41% return on investment over 90 days.

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

FAST RETAIL ADR  vs.  SALESFORCE INC CDR

FAST RETAIL ADR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FAST RETAIL reported solid returns over the last few months and may actually be approaching a breakup point.

SALESFORCE INC CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SALESFORCE INC CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SALESFORCE INC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FAST RETAIL and SALESFORCE INC

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

The idea behind FAST RETAIL ADR and SALESFORCE INC CDR 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.