Correlation Between Salesforce and EGPT

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

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

Diversification Opportunities for Salesforce and EGPT

0.09

Correlation Coefficient

Salesforce  EGPT

Significant diversification

The 3 months correlation between Salesforce and EGPT is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and EGPT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGPT 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 EGPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGPT has no effect on the direction of Salesforce i.e., Salesforce and EGPT go up and down completely randomly.

Pair Corralation between Salesforce and EGPT

Considering the 90-day investment horizon Salesforce is expected to under-perform the EGPT. In addition to that, Salesforce is 1.69 times more volatile than EGPT. It trades about -0.11 of its total potential returns per unit of risk. EGPT is currently generating about 0.01 per unit of volatility. If you would invest  2,147  in EGPT on March 7, 2024 and sell it today you would earn a total of  1.00  from holding EGPT or generate 0.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	20.63%
Values	Daily Returns

Salesforce  vs.  EGPT

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

EGPT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EGPT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EGPT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Salesforce and EGPT

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

The idea behind Salesforce and EGPT 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.