Correlation Between Salesforce and KBR

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Can any of the company-specific risk be diversified away by investing in both Salesforce and KBR 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 KBR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and KBR Inc, you can compare the effects of market volatilities on Salesforce and KBR 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 KBR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and KBR.

Diversification Opportunities for Salesforce and KBR

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Salesforce and KBR is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and KBR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBR Inc 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 KBR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBR Inc has no effect on the direction of Salesforce i.e., Salesforce and KBR go up and down completely randomly.

Pair Corralation between Salesforce and KBR

Considering the 90-day investment horizon Salesforce is expected to generate 1.29 times more return on investment than KBR. However, Salesforce is 1.29 times more volatile than KBR Inc. It trades about 0.11 of its potential returns per unit of risk. KBR Inc is currently generating about 0.03 per unit of risk. If you would invest  12,990  in Salesforce on August 28, 2024 and sell it today you would earn a total of  20,921  from holding Salesforce or generate 161.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Salesforce  vs.  KBR Inc

 Performance 
       Timeline  
Salesforce 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.
KBR Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days KBR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest sluggish performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Salesforce and KBR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Salesforce and KBR

The main advantage of trading using opposite Salesforce and KBR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, KBR 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 KBR will offset losses from the drop in KBR's long position.
The idea behind Salesforce and KBR Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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