Correlation Between Salesforce and FORTUNE

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

Diversification Opportunities for Salesforce and FORTUNE

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Salesforce and FORTUNE is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and FORTUNE BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORTUNE BRANDS 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 FORTUNE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORTUNE BRANDS INC has no effect on the direction of Salesforce i.e., Salesforce and FORTUNE go up and down completely randomly.

Pair Corralation between Salesforce and FORTUNE

Considering the 90-day investment horizon Salesforce is expected to generate 1.55 times more return on investment than FORTUNE. However, Salesforce is 1.55 times more volatile than FORTUNE BRANDS INC. It trades about 0.21 of its potential returns per unit of risk. FORTUNE BRANDS INC is currently generating about -0.44 per unit of risk. If you would invest  29,889  in Salesforce on August 30, 2024 and sell it today you would earn a total of  3,112  from holding Salesforce or generate 10.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy31.82%
ValuesDaily Returns

Salesforce  vs.  FORTUNE BRANDS INC

 Performance 
       Timeline  
Salesforce 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 19 (%) 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.
FORTUNE BRANDS INC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days FORTUNE BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for FORTUNE BRANDS INC investors.

Salesforce and FORTUNE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Salesforce and FORTUNE

The main advantage of trading using opposite Salesforce and FORTUNE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, FORTUNE 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 FORTUNE will offset losses from the drop in FORTUNE's long position.
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The idea behind Salesforce and FORTUNE BRANDS 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.
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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