Correlation Between Salesforce and Current Water

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

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

Diversification Opportunities for Salesforce and Current Water

-0.08

Correlation Coefficient

Salesforce  Current Water

Good diversification

The 3 months correlation between Salesforce and Current is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding SalesforceCom CDR and Current Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Current Water Techno 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 SalesforceCom CDR are associated (or correlated) with Current Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Current Water Techno has no effect on the direction of Salesforce i.e., Salesforce and Current Water go up and down completely randomly.

Pair Corralation between Salesforce and Current Water

Assuming the 90 days trading horizon SalesforceCom CDR is expected to generate 0.11 times more return on investment than Current Water. However, SalesforceCom CDR is 8.98 times less risky than Current Water. It trades about 0.38 of its potential returns per unit of risk. Current Water Technologies is currently generating about 0.03 per unit of risk. If you would invest  1,958  in SalesforceCom CDR on August 10, 2024 and sell it today you would earn a total of  518.00  from holding SalesforceCom CDR or generate 26.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SalesforceCom CDR  vs.  Current Water Technologies

SalesforceCom CDR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Current Water Techno

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Current Water Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Current Water showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Current Water

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

The idea behind SalesforceCom CDR and Current Water Technologies 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.