Correlation Between Salesforce and Aspen Technology

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

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

Diversification Opportunities for Salesforce and Aspen Technology

0.3

Correlation Coefficient

Salesforce  Aspen Technology

Weak diversification

The 3 months correlation between Salesforce and Aspen is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Aspen Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Technology 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 Aspen Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Technology has no effect on the direction of Salesforce i.e., Salesforce and Aspen Technology go up and down completely randomly.

Pair Corralation between Salesforce and Aspen Technology

Considering the 90-day investment horizon Salesforce is expected to under-perform the Aspen Technology. In addition to that, Salesforce is 1.26 times more volatile than Aspen Technology. It trades about -0.21 of its total potential returns per unit of risk. Aspen Technology is currently generating about -0.21 per unit of volatility. If you would invest  21,519  in Aspen Technology on January 30, 2024 and sell it today you would lose (1,575) from holding Aspen Technology or give up 7.32% of portfolio value over 90 days.

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

Salesforce  vs.  Aspen Technology

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 recent stock price disarray, may contribute to short-term losses for the investors.

Aspen Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Salesforce and Aspen Technology

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

The idea behind Salesforce and Aspen Technology 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.