Correlation Between Salesforce and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Salesforce and Caterpillar 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 Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and Caterpillar, you can compare the effects of market volatilities on Salesforce and Caterpillar 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 Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Caterpillar.
Diversification Opportunities for Salesforce and Caterpillar
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Salesforce and Caterpillar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar 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 Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of Salesforce i.e., Salesforce and Caterpillar go up and down completely randomly.
Pair Corralation between Salesforce and Caterpillar
Considering the 90-day investment horizon Salesforce is expected to generate 0.86 times more return on investment than Caterpillar. However, Salesforce is 1.17 times less risky than Caterpillar. It trades about 0.36 of its potential returns per unit of risk. Caterpillar is currently generating about 0.05 per unit of risk. If you would invest 29,377 in Salesforce on August 27, 2024 and sell it today you would earn a total of 4,825 from holding Salesforce or generate 16.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Salesforce vs. Caterpillar
Performance |
| Timeline |
| Salesforce |
| Caterpillar |
Salesforce and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salesforce and Caterpillar
The main advantage of trading using opposite Salesforce and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.| Salesforce vs. Zoom Video Communications | Salesforce vs. C3 Ai Inc | Salesforce vs. Shopify | Salesforce vs. Workday |
| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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