Correlation Between Salesforce and Lowes Companies

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

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

Diversification Opportunities for Salesforce and Lowes Companies

0.8

Correlation Coefficient

Salesforce  Lowes Companies

Very poor diversification

The 3 months correlation between Salesforce and Lowes is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding salesforce inc and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies 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 inc are associated (or correlated) with Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of Salesforce i.e., Salesforce and Lowes Companies go up and down completely randomly.

Pair Corralation between Salesforce and Lowes Companies

Assuming the 90 days trading horizon salesforce inc is expected to generate 1.71 times more return on investment than Lowes Companies. However, Salesforce is 1.71 times more volatile than Lowes Companies. It trades about 0.29 of its potential returns per unit of risk. Lowes Companies is currently generating about 0.16 per unit of risk. If you would invest  6,474  in salesforce inc on September 14, 2024 and sell it today you would earn a total of  3,286  from holding salesforce inc or generate 50.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

salesforce inc  vs.  Lowes Companies

salesforce inc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in salesforce inc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Salesforce sustained solid returns over the last few months and may actually be approaching a breakup point.

Lowes Companies

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Salesforce and Lowes Companies

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

The idea behind salesforce inc and Lowes Companies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.