Correlation Between Salesforce and New Focus

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

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

Diversification Opportunities for Salesforce and New Focus

-0.12

Correlation Coefficient

Salesforce  New Focus

Good diversification

The 3 months correlation between Salesforce and New is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and New Focus Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Focus Auto 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 New Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Focus Auto has no effect on the direction of Salesforce i.e., Salesforce and New Focus go up and down completely randomly.

Pair Corralation between Salesforce and New Focus

If you would invest  2.40  in New Focus Auto on January 20, 2024 and sell it today you would earn a total of  0.00  from holding New Focus Auto or generate 0.0% return on investment over 90 days.

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

Salesforce  vs.  New Focus Auto

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 current stock price disarray, may contribute to short-term losses for the investors.

New Focus Auto

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Focus Auto are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Focus may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Salesforce and New Focus

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

The idea behind Salesforce and New Focus Auto 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.