Correlation Between Salesforce and Small Cap
Can any of the company-specific risk be diversified away by investing in both Salesforce and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and Small Cap Value, you can compare the effects of market volatilities on Salesforce and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Small Cap.
Diversification Opportunities for Salesforce and Small Cap
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Salesforce and Small is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Salesforce i.e., Salesforce and Small Cap go up and down completely randomly.
Pair Corralation between Salesforce and Small Cap
Considering the 90-day investment horizon Salesforce is expected to generate 1.3 times more return on investment than Small Cap. However, Salesforce is 1.3 times more volatile than Small Cap Value. It trades about 0.28 of its potential returns per unit of risk. Small Cap Value is currently generating about 0.23 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 | 100.0% |
| Values | Daily Returns |
Salesforce vs. Small Cap Value
Performance |
| Timeline |
| Salesforce |
| Small Cap Value |
Salesforce and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salesforce and Small Cap
The main advantage of trading using opposite Salesforce and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Salesforce vs. Ke Holdings | Salesforce vs. nCino Inc | Salesforce vs. Kingsoft Cloud Holdings | Salesforce vs. Jfrog |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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