Correlation Between Salesforce and Absolute Software

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

By analyzing existing cross correlation between Salesforce and Absolute Software, you can compare the effects of market volatilities on Salesforce and Absolute Software 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 Absolute Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Absolute Software.

Diversification Opportunities for Salesforce and Absolute Software

0.61

Correlation Coefficient

Salesforce  Absolute Software

Poor diversification

The 3 months correlation between Salesforce and Absolute is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Absolute Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Software 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 Absolute Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Software has no effect on the direction of Salesforce i.e., Salesforce and Absolute Software go up and down completely randomly.

Pair Corralation between Salesforce and Absolute Software

If you would invest  1,149  in Absolute Software on January 20, 2024 and sell it today you would earn a total of  0.00  from holding Absolute Software or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Salesforce  vs.  Absolute Software

Salesforce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Absolute Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Absolute Software is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Salesforce and Absolute Software

The main advantage of trading using opposite Salesforce and Absolute Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, Absolute Software 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 Absolute Software will offset losses from the drop in Absolute Software's long position.

The idea behind Salesforce and Absolute Software 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.