Correlation Between Salesforce and Moodys

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

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

Diversification Opportunities for Salesforce and Moodys

0.23

Correlation Coefficient

Salesforce  Moodys

Modest diversification

The 3 months correlation between Salesforce and Moodys is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys and Salesforce 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 Salesforce are associated (or correlated) with Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of Salesforce i.e., Salesforce and Moodys go up and down completely randomly.

Pair Corralation between Salesforce and Moodys

Considering the 90-day investment horizon Salesforce is expected to under-perform the Moodys. In addition to that, Salesforce is 1.86 times more volatile than Moodys. It trades about -0.22 of its total potential returns per unit of risk. Moodys is currently generating about -0.17 per unit of volatility. If you would invest  39,024  in Moodys on January 27, 2024 and sell it today you would lose (1,506) from holding Moodys or give up 3.86% of portfolio value over 90 days.

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

Salesforce  vs.  Moodys

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.

Moodys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Moodys is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and Moodys

The main advantage of trading using opposite Salesforce and Moodys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, Moodys 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 Moodys will offset losses from the drop in Moodys' long position.

The idea behind Salesforce and Moodys 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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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.