Correlation Between Salesforce and Eastside Distilling

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

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

Diversification Opportunities for Salesforce and Eastside Distilling

0.25

Correlation Coefficient

Salesforce  Eastside Distilling

Modest diversification

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

Pair Corralation between Salesforce and Eastside Distilling

Considering the 90-day investment horizon Salesforce is expected to under-perform the Eastside Distilling. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 3.65 times less risky than Eastside Distilling. The stock trades about -0.23 of its potential returns per unit of risk. The Eastside Distilling is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Eastside Distilling on January 26, 2024 and sell it today you would earn a total of  7.00  from holding Eastside Distilling or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Salesforce  vs.  Eastside Distilling

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.

Eastside Distilling

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastside Distilling are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Eastside Distilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Eastside Distilling

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

The idea behind Salesforce and Eastside Distilling 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.