diversifiable risk of combining Microsoft and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Salesforce, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Salesforce.
Diversification Opportunities for Microsoft and Salesforce
Pair Corralation between Microsoft and Salesforce
Given the investment horizon of 90 days Microsoft is expected to under-perform the Salesforce. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.16 times less risky than Salesforce. The stock trades about -0.01 of its potential returns per unit of risk. The Salesforce is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 28,786 in Salesforce on November 28, 2023 and sell it today you would earn a total of 1,253 from holding Salesforce or generate 4.35% return on investment over 90 days.
Microsoft vs. Salesforce
Microsoft and Salesforce Volatility Contrast
Pair Trading with Microsoft and SalesforceThe main advantage of trading using opposite Microsoft and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments
|Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
|Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Find insiders across different sectors to evaluate their impact on performance
Check real value of public entities based on technical and fundamental data
Compare performance and examine fundamental relationship between any two equity instruments
Get historical volatility and risk analysis based on latest market data
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
|Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Get suggestions outside of your existing asset allocation including your own model portfolios
|AI Investment Finder
Use AI to screen and filter profitable investment opportunities