Correlation Between Amazon CDR and Salesforce
Can any of the company-specific risk be diversified away by investing in both Amazon CDR 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 Amazon CDR and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and SalesforceCom CDR, you can compare the effects of market volatilities on Amazon CDR 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 Amazon CDR with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and Salesforce.
Diversification Opportunities for Amazon CDR and Salesforce
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and Salesforce is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and SalesforceCom CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalesforceCom CDR and Amazon CDR 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 Amazon CDR 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 SalesforceCom CDR has no effect on the direction of Amazon CDR i.e., Amazon CDR and Salesforce go up and down completely randomly.
Pair Corralation between Amazon CDR and Salesforce
Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.13 times less return on investment than Salesforce. But when comparing it to its historical volatility, Amazon CDR is 1.01 times less risky than Salesforce. It trades about 0.23 of its potential returns per unit of risk. SalesforceCom CDR is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,327 in SalesforceCom CDR on September 1, 2024 and sell it today you would earn a total of 304.00 from holding SalesforceCom CDR or generate 13.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon CDR vs. SalesforceCom CDR
Performance |
| Timeline |
| Amazon CDR |
| SalesforceCom CDR |
Amazon CDR and Salesforce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and Salesforce
The main advantage of trading using opposite Amazon CDR and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR 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.| Amazon CDR vs. iShares Canadian HYBrid | Amazon CDR vs. Altagas Cum Red | Amazon CDR vs. European Residential Real | Amazon CDR vs. iShares Fundamental Hedged |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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