Correlation Between Salesforce and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Salesforce and Rheinmetall 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 Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and Rheinmetall AG, you can compare the effects of market volatilities on Salesforce and Rheinmetall 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 Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Rheinmetall.
Diversification Opportunities for Salesforce and Rheinmetall
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Salesforce and Rheinmetall is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG 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 Rheinmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rheinmetall AG has no effect on the direction of Salesforce i.e., Salesforce and Rheinmetall go up and down completely randomly.
Pair Corralation between Salesforce and Rheinmetall
Assuming the 90 days trading horizon Salesforce is expected to under-perform the Rheinmetall. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.87 times less risky than Rheinmetall. The stock trades about -0.23 of its potential returns per unit of risk. The Rheinmetall AG is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest 62,100 in Rheinmetall AG on October 23, 2024 and sell it today you would earn a total of 7,800 from holding Rheinmetall AG or generate 12.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Salesforce vs. Rheinmetall AG
Performance |
| Timeline |
| Salesforce |
| Rheinmetall AG |
Salesforce and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salesforce and Rheinmetall
The main advantage of trading using opposite Salesforce and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, Rheinmetall 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 Rheinmetall will offset losses from the drop in Rheinmetall's long position.| Salesforce vs. Nippon Light Metal | Salesforce vs. Fortescue Metals Group | Salesforce vs. Forsys Metals Corp | Salesforce vs. Cal Maine Foods |
| Rheinmetall vs. Gruppo Mutuionline SpA | Rheinmetall vs. Fast Retailing Co | Rheinmetall vs. Tradegate AG Wertpapierhandelsbank | Rheinmetall vs. Salesforce |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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