Correlation Between Appfolio and Salesforce

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

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

Diversification Opportunities for Appfolio and Salesforce

-0.13

Correlation Coefficient

Appfolio  Salesforce

Good diversification

The 3 months correlation between Appfolio and Salesforce is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Appfolio and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Appfolio 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 Appfolio 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 Appfolio i.e., Appfolio and Salesforce go up and down completely randomly.

Pair Corralation between Appfolio and Salesforce

Given the investment horizon of 90 days Appfolio is expected to generate 1.09 times less return on investment than Salesforce. In addition to that, Appfolio is 1.24 times more volatile than Salesforce. It trades about 0.05 of its total potential returns per unit of risk. Salesforce is currently generating about 0.07 per unit of volatility. If you would invest  16,187  in Salesforce on July 20, 2024 and sell it today you would earn a total of  12,924  from holding Salesforce or generate 79.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Appfolio  vs.  Salesforce

Appfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Appfolio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Salesforce

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Appfolio and Salesforce

The main advantage of trading using opposite Appfolio and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Appfolio 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 Appfolio 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.