Correlation Between Salesforce and INITECH Co

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

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

Diversification Opportunities for Salesforce and INITECH Co

-0.41

Correlation Coefficient

Salesforce  INITECH Co

Very good diversification

The 3 months correlation between Salesforce and INITECH is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and INITECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INITECH Co 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 INITECH Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INITECH Co has no effect on the direction of Salesforce i.e., Salesforce and INITECH Co go up and down completely randomly.

Pair Corralation between Salesforce and INITECH Co

Considering the 90-day investment horizon Salesforce is expected to generate 17.15 times less return on investment than INITECH Co. But when comparing it to its historical volatility, Salesforce is 1.25 times less risky than INITECH Co. It trades about 0.0 of its potential returns per unit of risk. INITECH Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  333,500  in INITECH Co on February 17, 2024 and sell it today you would earn a total of  25,500  from holding INITECH Co or generate 7.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Salesforce  vs.  INITECH Co

Salesforce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

INITECH Co

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INITECH Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, INITECH Co may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Salesforce and INITECH Co

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

The idea behind Salesforce and INITECH Co 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.