Correlation Between Salesforce and China Rare
Can any of the company-specific risk be diversified away by investing in both Salesforce and China Rare 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 China Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and China Rare Earth, you can compare the effects of market volatilities on Salesforce and China Rare 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 China Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and China Rare.
Diversification Opportunities for Salesforce and China Rare
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Salesforce and China is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and China Rare Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Rare Earth 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 China Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Rare Earth has no effect on the direction of Salesforce i.e., Salesforce and China Rare go up and down completely randomly.
Pair Corralation between Salesforce and China Rare
Considering the 90-day investment horizon Salesforce is expected to generate 0.4 times more return on investment than China Rare. However, Salesforce is 2.49 times less risky than China Rare. It trades about 0.24 of its potential returns per unit of risk. China Rare Earth is currently generating about 0.03 per unit of risk. If you would invest 29,377 in Salesforce on August 29, 2024 and sell it today you would earn a total of 3,624 from holding Salesforce or generate 12.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Salesforce vs. China Rare Earth
Performance |
| Timeline |
| Salesforce |
| China Rare Earth |
Salesforce and China Rare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salesforce and China Rare
The main advantage of trading using opposite Salesforce and China Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, China Rare 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 China Rare will offset losses from the drop in China Rare's long position.| Salesforce vs. Zoom Video Communications | Salesforce vs. C3 Ai Inc | Salesforce vs. Shopify | Salesforce vs. Workday |
| China Rare vs. Rockridge Resources | China Rare vs. Ameriwest Lithium | China Rare vs. Osisko Metals Incorporated | China Rare vs. Volt Lithium Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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