Correlation Between Salesforce and Microsoft Corp

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

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

Diversification Opportunities for Salesforce and Microsoft Corp

0.22
  Correlation Coefficient
Salesforce
Microsoft Corp

Modest diversification

The 3 months correlation between Salesforce and Microsoft is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Microsoft Corp in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp 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 Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of Salesforce i.e., Salesforce and Microsoft Corp go up and down completely randomly.

Pair Corralation between Salesforce and Microsoft Corp

Considering the 90-day investment horizon Salesforce is expected to under-perform the Microsoft Corp. In addition to that, Salesforce is 1.41 times more volatile than Microsoft Corp. It trades about -0.16 of its total potential returns per unit of risk. Microsoft Corp is currently generating about -0.11 per unit of volatility. If you would invest  32,380  in Microsoft Corp on October 18, 2021 and sell it today you would lose (1,360)  from holding Microsoft Corp or give up 4.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Salesforce  vs.  Microsoft Corp

 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

Microsoft Corp 
Microsoft Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Salesforce and Microsoft Corp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Salesforce and Microsoft Corp

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

Microsoft Corp

Pair trading matchups for Microsoft Corp

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

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