Correlation Between S A P and Salesforce
Can any of the company-specific risk be diversified away by investing in both S A P 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 S A P and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE ADR and Salesforce, you can compare the effects of market volatilities on S A P 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 S A P with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Salesforce.
Diversification Opportunities for S A P and Salesforce
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SAP and Salesforce is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and S A P 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 SAP SE ADR 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 S A P i.e., S A P and Salesforce go up and down completely randomly.
Pair Corralation between S A P and Salesforce
Considering the 90-day investment horizon S A P is expected to generate 20.69 times less return on investment than Salesforce. But when comparing it to its historical volatility, SAP SE ADR is 1.43 times less risky than Salesforce. It trades about 0.03 of its potential returns per unit of risk. Salesforce is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 28,443 in Salesforce on August 24, 2024 and sell it today you would earn a total of 5,759 from holding Salesforce or generate 20.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE ADR vs. Salesforce
Performance |
| Timeline |
| SAP SE ADR |
| Salesforce |
S A P and Salesforce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Salesforce
The main advantage of trading using opposite S A P and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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 SAP SE ADR 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. 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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