Correlation Between Vale SA and Salesforce
Can any of the company-specific risk be diversified away by investing in both Vale SA and Salesforce 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 Vale SA and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Salesforce, you can compare the effects of market volatilities on Vale SA and Salesforce 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 Vale SA with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Salesforce.
Diversification Opportunities for Vale SA and Salesforce
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vale and Salesforce is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Vale SA 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 Vale SA are associated (or correlated) with Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Vale SA i.e., Vale SA and Salesforce go up and down completely randomly.
Pair Corralation between Vale SA and Salesforce
Assuming the 90 days trading horizon Vale SA is expected to under-perform the Salesforce. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 1.05 times less risky than Salesforce. The stock trades about -0.02 of its potential returns per unit of risk. The Salesforce is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 12,605 in Salesforce on September 2, 2024 and sell it today you would earn a total of 18,800 from holding Salesforce or generate 149.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Salesforce
Performance |
| Timeline |
| Vale SA |
| Salesforce |
Vale SA and Salesforce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Salesforce
The main advantage of trading using opposite Vale SA and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Salesforce 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 Salesforce will offset losses from the drop in Salesforce's long position.The idea behind Vale SA and Salesforce 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.| Salesforce vs. Rogers Communications | Salesforce vs. BJs Restaurants | Salesforce vs. SBA Communications Corp | Salesforce vs. Gamma Communications plc |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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