Correlation Between Salesforce and Skyworks Solutions

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

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

Diversification Opportunities for Salesforce and Skyworks Solutions

0.65

Correlation Coefficient

Salesforce  Skyworks Solutions

Poor diversification

The 3 months correlation between Salesforce and Skyworks is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Skyworks Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyworks Solutions 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 Skyworks Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyworks Solutions has no effect on the direction of Salesforce i.e., Salesforce and Skyworks Solutions go up and down completely randomly.

Pair Corralation between Salesforce and Skyworks Solutions

Considering the 90-day investment horizon Salesforce is expected to generate 0.55 times more return on investment than Skyworks Solutions. However, Salesforce is 1.83 times less risky than Skyworks Solutions. It trades about -0.24 of its potential returns per unit of risk. Skyworks Solutions is currently generating about -0.19 per unit of risk. If you would invest  30,474  in Salesforce on February 3, 2024 and sell it today you would lose (3,261) from holding Salesforce or give up 10.7% of portfolio value over 90 days.

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

Salesforce  vs.  Skyworks Solutions

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.

Skyworks Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyworks Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Salesforce and Skyworks Solutions

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

The idea behind Salesforce and Skyworks Solutions 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.