Correlation Between Targa Resources and Salesforce

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

By analyzing existing cross correlation between Targa Resources Corp and Salesforce, you can compare the effects of market volatilities on Targa Resources and Salesforce 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 Targa Resources with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Targa Resources and Salesforce.

Diversification Opportunities for Targa Resources and Salesforce

0.88

Correlation Coefficient

Targa Resources  Salesforce

Very poor diversification

The 3 months correlation between Targa and Salesforce is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Targa Resources Corp and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Targa Resources 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 Targa Resources Corp are associated (or correlated) with Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Targa Resources i.e., Targa Resources and Salesforce go up and down completely randomly.

Pair Corralation between Targa Resources and Salesforce

Assuming the 90 days horizon Targa Resources Corp is expected to generate 0.93 times more return on investment than Salesforce. However, Targa Resources Corp is 1.07 times less risky than Salesforce. It trades about 0.16 of its potential returns per unit of risk. Salesforce is currently generating about 0.13 per unit of risk. If you would invest  12,007  in Targa Resources Corp on September 29, 2024 and sell it today you would earn a total of  4,973  from holding Targa Resources Corp or generate 41.42% return on investment over 90 days.

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

Targa Resources Corp  vs.  Salesforce

Targa Resources Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Targa Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Salesforce

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Targa Resources and Salesforce

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

The idea behind Targa Resources Corp and Salesforce 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.