Correlation Between Salesforce and Insulet

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

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

Diversification Opportunities for Salesforce and Insulet

0.78

Correlation Coefficient

Salesforce  Insulet

Poor diversification

The 3 months correlation between Salesforce and Insulet is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Insulet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insulet 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 Insulet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insulet has no effect on the direction of Salesforce i.e., Salesforce and Insulet go up and down completely randomly.

Pair Corralation between Salesforce and Insulet

Considering the 90-day investment horizon Salesforce is expected to under-perform the Insulet. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.07 times less risky than Insulet. The stock trades about -0.09 of its potential returns per unit of risk. The Insulet is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  28,308  in Insulet on February 7, 2025 and sell it today you would lose (1,877) from holding Insulet or give up 6.63% of portfolio value over 90 days.

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

Salesforce  vs.  Insulet

Salesforce

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Insulet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insulet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Insulet is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Salesforce and Insulet

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

The idea behind Salesforce and Insulet 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.