Correlation Between Salesforce and Invesco KBW

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

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

Diversification Opportunities for Salesforce and Invesco KBW

0.59

Correlation Coefficient

Salesforce  Invesco KBW

Very weak diversification

The 3 months correlation between Salesforce and Invesco is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Invesco KBW Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Bank 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 Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Bank has no effect on the direction of Salesforce i.e., Salesforce and Invesco KBW go up and down completely randomly.

Pair Corralation between Salesforce and Invesco KBW

Considering the 90-day investment horizon Salesforce is expected to generate 1.25 times more return on investment than Invesco KBW. However, Salesforce is 1.25 times more volatile than Invesco KBW Bank. It trades about 0.07 of its potential returns per unit of risk. Invesco KBW Bank is currently generating about 0.06 per unit of risk. If you would invest  22,531  in Salesforce on January 24, 2024 and sell it today you would earn a total of  4,850  from holding Salesforce or generate 21.53% return on investment over 90 days.

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

Salesforce  vs.  Invesco KBW Bank

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.

Invesco KBW Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco KBW Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Invesco KBW is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and Invesco KBW

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

The idea behind Salesforce and Invesco KBW Bank 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.