Correlation Between Twitter and Salesforce

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

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

Diversification Opportunities for Twitter and Salesforce

-0.39
  Correlation Coefficient
Twitter
Salesforce

Very good diversification

The 3 months correlation between Twitter and Salesforce is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Twitter and Salesforce in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Twitter 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 Twitter 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 Twitter i.e., Twitter and Salesforce go up and down completely randomly.

Pair Corralation between Twitter and Salesforce

Given the investment horizon of 90 days Twitter is expected to generate 1.29 times more return on investment than Salesforce. However, Twitter is 1.29 times more volatile than Salesforce. It trades about 0.06 of its potential returns per unit of risk. Salesforce is currently generating about 0.06 per unit of risk. If you would invest  3,019  in Twitter on July 28, 2021 and sell it today you would earn a total of  3,124  from holding Twitter or generate 103.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.79%
ValuesDaily Returns

Twitter  vs.  Salesforce

 Performance (%) 
      Timeline 
Twitter 
 Twitter Performance
0 of 100
Over the last 90 days Twitter has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Twitter Price Channel

Salesforce 
 Salesforce Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Salesforce revealed solid returns over the last few months and may actually be approaching a breakup point.

Salesforce Price Channel

Twitter and Salesforce Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Twitter and Salesforce

The main advantage of trading using opposite Twitter and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Twitter 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 Twitter 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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