Correlation Between Salesforce and Bank of East

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

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

Diversification Opportunities for Salesforce and Bank of East

0.25

Correlation Coefficient

Salesforce  Bank of East

Modest diversification

The 3 months correlation between Salesforce and Bank is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Bank of East in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of East 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 Bank of East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of East has no effect on the direction of Salesforce i.e., Salesforce and Bank of East go up and down completely randomly.

Pair Corralation between Salesforce and Bank of East

Considering the 90-day investment horizon Salesforce is expected to under-perform the Bank of East. In addition to that, Salesforce is 1.96 times more volatile than Bank of East. It trades about -0.26 of its total potential returns per unit of risk. Bank of East is currently generating about 0.23 per unit of volatility. If you would invest  120.00  in Bank of East on February 2, 2024 and sell it today you would earn a total of  6.00  from holding Bank of East or generate 5.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Salesforce  vs.  Bank of East

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.

Bank of East

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of East are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bank of East showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Bank of East

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

The idea behind Salesforce and Bank of East 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 Commodity Directory module to find actively traded commodities issued by global exchanges.