Correlation Between Black Knight and Salesforce

Can any of the company-specific risk be diversified away by investing in both Black Knight 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 Black Knight and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Black Knight and Salesforce, you can compare the effects of market volatilities on Black Knight 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 Black Knight with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Knight and Salesforce.

Diversification Opportunities for Black Knight and Salesforce

-0.06

Correlation Coefficient

Black Knight Salesforce

Good diversification

The 3 months correlation between Black and Salesforce is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Black Knight and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Black Knight 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 Black Knight 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 Black Knight i.e., Black Knight and Salesforce go up and down completely randomly.

Pair Corralation between Black Knight and Salesforce

Considering the 90-day investment horizon Black Knight is expected to under-perform the Salesforce. But the stock apears to be less risky and, when comparing its historical volatility, Black Knight is 1.38 times less risky than Salesforce. The stock trades about -0.02 of its potential returns per unit of risk. The Salesforce is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  24,448  in Salesforce on March 12, 2023 and sell it today you would lose (2,917)  from holding Salesforce or give up 11.93% of portfolio value over 90 days.

Black Knight  vs.  Salesforce

Black Knight

Black Performance

1 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Black Knight are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Black Knight is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Salesforce

Salesforce Performance

16 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Black Knight and Salesforce

The main advantage of trading using opposite Black Knight and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Knight 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 Black Knight 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.