Correlation Between Salesforce and Ford

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

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

Diversification Opportunities for Salesforce and Ford

-0.72
  Correlation Coefficient
Salesforce
Ford Motor

Pay attention - limited upside

The 3 months correlation between Salesforce and Ford is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Ford Motor in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Salesforce i.e., Salesforce and Ford go up and down completely randomly.

Pair Corralation between Salesforce and Ford

Considering the 90-day investment horizon Salesforce is expected to generate 4.83 times less return on investment than Ford. But when comparing it to its historical volatility, Salesforce is 1.07 times less risky than Ford. It trades about 0.03 of its potential returns per unit of risk. Ford Motor is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  598.00  in Ford Motor on October 20, 2021 and sell it today you would earn a total of  1,840  from holding Ford Motor or generate 307.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Salesforce  vs.  Ford Motor

 Performance (%) 
      Timeline 
Salesforce 
Salesforce Performance
0 of 100
Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in February 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Salesforce Price Channel

Ford Motor 
Ford Performance
16 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Ford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford Price Channel

Salesforce and Ford Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Salesforce and Ford

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

Ford Motor

Pair trading matchups for Ford

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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