Correlation Between Salesforce and COLGATE

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

Diversification Opportunities for Salesforce and COLGATE

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Salesforce and COLGATE is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and COLGATE PALMOLIVE MEDIUM TERM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COLGATE PALMOLIVE 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 COLGATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COLGATE PALMOLIVE has no effect on the direction of Salesforce i.e., Salesforce and COLGATE go up and down completely randomly.

Pair Corralation between Salesforce and COLGATE

Considering the 90-day investment horizon Salesforce is expected to generate 2.13 times more return on investment than COLGATE. However, Salesforce is 2.13 times more volatile than COLGATE PALMOLIVE MEDIUM TERM. It trades about 0.07 of its potential returns per unit of risk. COLGATE PALMOLIVE MEDIUM TERM is currently generating about -0.01 per unit of risk. If you would invest  24,775  in Salesforce on September 2, 2024 and sell it today you would earn a total of  8,224  from holding Salesforce or generate 33.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy75.0%
ValuesDaily Returns

Salesforce  vs.  COLGATE PALMOLIVE MEDIUM TERM

 Performance 
       Timeline  
Salesforce 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.
COLGATE PALMOLIVE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days COLGATE PALMOLIVE MEDIUM TERM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COLGATE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Salesforce and COLGATE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Salesforce and COLGATE

The main advantage of trading using opposite Salesforce and COLGATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, COLGATE 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 COLGATE will offset losses from the drop in COLGATE's long position.
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The idea behind Salesforce and COLGATE PALMOLIVE MEDIUM TERM 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.
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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