Correlation Between International Display and Salesforce

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

By analyzing existing cross correlation between International Display Advertising and Salesforce, you can compare the effects of market volatilities on International Display 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 International Display with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Display and Salesforce.

Diversification Opportunities for International Display and Salesforce

0.47

Correlation Coefficient

International Display  Salesforce

Very weak diversification

The 3 months correlation between International and Salesforce is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding International Display Advertis and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and International Display 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 International Display Advertising 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 International Display i.e., International Display and Salesforce go up and down completely randomly.

Pair Corralation between International Display and Salesforce

Given the investment horizon of 90 days International Display Advertising is expected to under-perform the Salesforce. In addition to that, International Display is 3.64 times more volatile than Salesforce. It trades about -0.16 of its total potential returns per unit of risk. Salesforce is currently generating about -0.23 per unit of volatility. If you would invest  30,583  in Salesforce on January 26, 2024 and sell it today you would lose (2,964) from holding Salesforce or give up 9.69% of portfolio value over 90 days.

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

International Display Advertis  vs.  Salesforce

International Display

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Display Advertising are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, International Display may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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.

Pair Trading with International Display and Salesforce

The main advantage of trading using opposite International Display and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Display 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 International Display Advertising 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.