Correlation Between IAC and Salesforce

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Can any of the company-specific risk be diversified away by investing in both IAC and Salesforce 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 IAC and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IAC Inc and Salesforce, you can compare the effects of market volatilities on IAC and Salesforce 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 IAC with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAC and Salesforce.

Diversification Opportunities for IAC and Salesforce

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between IAC and Salesforce is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding IAC Inc and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and IAC 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 IAC Inc are associated (or correlated) with Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of IAC i.e., IAC and Salesforce go up and down completely randomly.

Pair Corralation between IAC and Salesforce

Considering the 90-day investment horizon IAC Inc is expected to under-perform the Salesforce. But the stock apears to be less risky and, when comparing its historical volatility, IAC Inc is 1.08 times less risky than Salesforce. The stock trades about -0.28 of its potential returns per unit of risk. The Salesforce is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  28,602  in Salesforce on December 20, 2023 and sell it today you would earn a total of  1,449  from holding Salesforce or generate 5.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

IAC Inc  vs.  Salesforce

 Performance 
       Timeline  
IAC Inc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days IAC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IAC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Salesforce 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

IAC and Salesforce Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IAC and Salesforce

The main advantage of trading using opposite IAC and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAC position performs unexpectedly, Salesforce 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 Salesforce will offset losses from the drop in Salesforce's long position.
The idea behind IAC Inc and Salesforce 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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