Correlation Between Salesforce and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Salesforce and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and Meta Platforms, you can compare the effects of market volatilities on Salesforce and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Meta Platforms.
Diversification Opportunities for Salesforce and Meta Platforms
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Salesforce and Meta is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Salesforce i.e., Salesforce and Meta Platforms go up and down completely randomly.
Pair Corralation between Salesforce and Meta Platforms
Considering the 90-day investment horizon Salesforce is expected to generate 1.38 times more return on investment than Meta Platforms. However, Salesforce is 1.38 times more volatile than Meta Platforms. It trades about 0.28 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.12 per unit of risk. If you would invest 29,137 in Salesforce on September 1, 2024 and sell it today you would earn a total of 3,862 from holding Salesforce or generate 13.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Salesforce vs. Meta Platforms
Performance |
| Timeline |
| Salesforce |
| Meta Platforms |
Salesforce and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salesforce and Meta Platforms
The main advantage of trading using opposite Salesforce and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.| Salesforce vs. Ke Holdings | Salesforce vs. nCino Inc | Salesforce vs. Kingsoft Cloud Holdings | Salesforce vs. Jfrog |
| Meta Platforms vs. Amazon Inc | Meta Platforms vs. Apple Inc | Meta Platforms vs. Meta Platforms | Meta Platforms vs. Microsoft |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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