Correlation Between Microsoft Corp and Salesforce
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp 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 Microsoft Corp and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp CDR and SalesforceCom CDR, you can compare the effects of market volatilities on Microsoft Corp 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 Microsoft Corp with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Salesforce.
Diversification Opportunities for Microsoft Corp and Salesforce
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Salesforce is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and SalesforceCom CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalesforceCom CDR and Microsoft Corp 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 Microsoft Corp CDR 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 SalesforceCom CDR has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Salesforce go up and down completely randomly.
Pair Corralation between Microsoft Corp and Salesforce
Assuming the 90 days trading horizon Microsoft Corp is expected to generate 2.96 times less return on investment than Salesforce. But when comparing it to its historical volatility, Microsoft Corp CDR is 1.82 times less risky than Salesforce. It trades about 0.13 of its potential returns per unit of risk. SalesforceCom CDR is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,300 in SalesforceCom CDR on September 13, 2024 and sell it today you would earn a total of 528.00 from holding SalesforceCom CDR or generate 22.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft Corp CDR vs. SalesforceCom CDR
Performance |
| Timeline |
| Microsoft Corp CDR |
| SalesforceCom CDR |
Microsoft Corp and Salesforce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft Corp and Salesforce
The main advantage of trading using opposite Microsoft Corp and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp 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.| Microsoft Corp vs. NextSource Materials | Microsoft Corp vs. Data Communications Management | Microsoft Corp vs. Information Services | Microsoft Corp vs. Brookfield Office Properties |
| Salesforce vs. Adcore Inc | Salesforce vs. Emerge Commerce | Salesforce vs. Quisitive Technology Solutions | Salesforce vs. DGTL Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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