Correlation Between Salesforce and Wayfair
Can any of the company-specific risk be diversified away by investing in both Salesforce and Wayfair 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 Wayfair into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and Wayfair, you can compare the effects of market volatilities on Salesforce and Wayfair 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 Wayfair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Wayfair.
Diversification Opportunities for Salesforce and Wayfair
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Salesforce and Wayfair is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair 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 Wayfair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayfair has no effect on the direction of Salesforce i.e., Salesforce and Wayfair go up and down completely randomly.
Pair Corralation between Salesforce and Wayfair
Considering the 90-day investment horizon Salesforce is expected to generate 10.54 times less return on investment than Wayfair. But when comparing it to its historical volatility, Salesforce is 1.74 times less risky than Wayfair. It trades about 0.02 of its potential returns per unit of risk. Wayfair is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,499 in Wayfair on November 18, 2024 and sell it today you would earn a total of 442.00 from holding Wayfair or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Salesforce vs. Wayfair
Performance |
| Timeline |
| Salesforce |
| Wayfair |
Salesforce and Wayfair Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salesforce and Wayfair
The main advantage of trading using opposite Salesforce and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, Wayfair 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 Wayfair will offset losses from the drop in Wayfair's long position.| Salesforce vs. Zoom Video Communications | Salesforce vs. C3 Ai Inc | Salesforce vs. Shopify | Salesforce vs. Workday |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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