Correlation Between Meta Platforms and Salesforce
Can any of the company-specific risk be diversified away by investing in both Meta Platforms 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 Meta Platforms and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Salesforce, you can compare the effects of market volatilities on Meta Platforms 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 Meta Platforms with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Salesforce.
Diversification Opportunities for Meta Platforms and Salesforce
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meta and Salesforce is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Meta Platforms 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 Meta Platforms 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 Meta Platforms i.e., Meta Platforms and Salesforce go up and down completely randomly.
Pair Corralation between Meta Platforms and Salesforce
Given the investment horizon of 90 days Meta Platforms is expected to under-perform the Salesforce. But the stock apears to be less risky and, when comparing its historical volatility, Meta Platforms is 1.18 times less risky than Salesforce. The stock trades about -0.06 of its potential returns per unit of risk. The Salesforce is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 29,046 in Salesforce on August 26, 2024 and sell it today you would earn a total of 5,156 from holding Salesforce or generate 17.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meta Platforms vs. Salesforce
Performance |
| Timeline |
| Meta Platforms |
| Salesforce |
Meta Platforms and Salesforce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Salesforce
The main advantage of trading using opposite Meta Platforms and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms 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.| Meta Platforms vs. Alphabet Inc Class A | Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc | Meta Platforms vs. Baidu Inc |
| 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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