Correlation Between Salesforce and C Mer

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Can any of the company-specific risk be diversified away by investing in both Salesforce and C Mer 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 C Mer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and C Mer Industries, you can compare the effects of market volatilities on Salesforce and C Mer 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 C Mer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and C Mer.

Diversification Opportunities for Salesforce and C Mer

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Salesforce and CMER is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and C Mer Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C Mer Industries 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 C Mer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C Mer Industries has no effect on the direction of Salesforce i.e., Salesforce and C Mer go up and down completely randomly.

Pair Corralation between Salesforce and C Mer

Considering the 90-day investment horizon Salesforce is expected to generate 2.36 times less return on investment than C Mer. But when comparing it to its historical volatility, Salesforce is 1.78 times less risky than C Mer. It trades about 0.05 of its potential returns per unit of risk. C Mer Industries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  66,090  in C Mer Industries on December 30, 2023 and sell it today you would earn a total of  71,410  from holding C Mer Industries or generate 108.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy78.95%
ValuesDaily Returns

Salesforce  vs.  C Mer Industries

 Performance 
       Timeline  
Salesforce 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.
C Mer Industries 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in C Mer Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, C Mer sustained solid returns over the last few months and may actually be approaching a breakup point.

Salesforce and C Mer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Salesforce and C Mer

The main advantage of trading using opposite Salesforce and C Mer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, C Mer 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 C Mer will offset losses from the drop in C Mer's long position.
The idea behind Salesforce and C Mer Industries 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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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