Correlation Between INSURANCE AUST and SALESFORCE INC

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

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

Diversification Opportunities for INSURANCE AUST and SALESFORCE INC

0.86

Correlation Coefficient

INSURANCE AUST  SALESFORCE INC

Very poor diversification

The 3 months correlation between INSURANCE and SALESFORCE is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP 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 INSURANCE AUST 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 INSURANCE AUST GRP 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 INSURANCE AUST i.e., INSURANCE AUST and SALESFORCE INC go up and down completely randomly.

Pair Corralation between INSURANCE AUST and SALESFORCE INC

Assuming the 90 days trading horizon INSURANCE AUST is expected to generate 3.57 times less return on investment than SALESFORCE INC. But when comparing it to its historical volatility, INSURANCE AUST GRP is 2.02 times less risky than SALESFORCE INC. It trades about 0.1 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  1,310  in SALESFORCE INC CDR on September 19, 2024 and sell it today you would earn a total of  530.00  from holding SALESFORCE INC CDR or generate 40.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

INSURANCE AUST GRP  vs.  SALESFORCE INC CDR

INSURANCE AUST GRP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SALESFORCE INC CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SALESFORCE INC CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SALESFORCE INC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INSURANCE AUST and SALESFORCE INC

The main advantage of trading using opposite INSURANCE AUST and SALESFORCE INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INSURANCE AUST 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 INSURANCE AUST GRP 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.