Correlation Between Salesforce and British American
Can any of the company-specific risk be diversified away by investing in both Salesforce and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and British American Tobacco, you can compare the effects of market volatilities on Salesforce and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and British American.
Diversification Opportunities for Salesforce and British American
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Salesforce and British is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Salesforce i.e., Salesforce and British American go up and down completely randomly.
Pair Corralation between Salesforce and British American
Assuming the 90 days trading horizon Salesforce is expected to generate 1.8 times more return on investment than British American. However, Salesforce is 1.8 times more volatile than British American Tobacco. It trades about 0.09 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.04 per unit of risk. If you would invest 15,796 in Salesforce on August 27, 2024 and sell it today you would earn a total of 16,699 from holding Salesforce or generate 105.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Salesforce vs. British American Tobacco
Performance |
| Timeline |
| Salesforce |
| British American Tobacco |
Salesforce and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salesforce and British American
The main advantage of trading using opposite Salesforce and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Salesforce vs. Nemetschek AG ON | Salesforce vs. Superior Plus Corp | Salesforce vs. NMI Holdings | Salesforce vs. Origin Agritech |
| British American vs. British American Tobacco | British American vs. British American Tobacco | British American vs. Altria Group | British American vs. JAPAN TOBACCO UNSPADR12 |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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