Correlation Between Zalando SE and Salesforce

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

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

Diversification Opportunities for Zalando SE and Salesforce

0.7

Correlation Coefficient

Zalando SE Salesforce

Poor diversification

The 3 months correlation between Zalando and Salesforce is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Zalando SE and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Zalando SE 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 Zalando SE 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 Zalando SE i.e., Zalando SE and Salesforce go up and down completely randomly.

Pair Corralation between Zalando SE and Salesforce

Assuming the 90 days horizon Zalando SE is expected to under-perform the Salesforce. In addition to that, Zalando SE is 1.24 times more volatile than Salesforce. It trades about -0.04 of its total potential returns per unit of risk. Salesforce is currently generating about 0.0 per unit of volatility. If you would invest  22,029  in Salesforce on December 23, 2022 and sell it today you would lose (3,106)  from holding Salesforce or give up 14.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Zalando SE  vs.  Salesforce

Zalando SE

Zalando Performance

9 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Zalando SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Zalando SE may actually be approaching a critical reversion point that can send shares even higher in April 2023.

Salesforce

Salesforce Performance

20 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zalando SE and Salesforce

The main advantage of trading using opposite Zalando SE and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zalando SE 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.

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The idea behind Zalando SE 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.