Correlation Between Salesforce and VMware

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

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

Diversification Opportunities for Salesforce and VMware

0.05

Correlation Coefficient

Salesforce  VMware

Significant diversification

The 3 months correlation between Salesforce and VMware is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and VMware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMware Inc 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 VMware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VMware Inc has no effect on the direction of Salesforce i.e., Salesforce and VMware go up and down completely randomly.

Pair Corralation between Salesforce and VMware

Considering the 90-day investment horizon Salesforce is expected to generate 1.35 times more return on investment than VMware. However, Salesforce is 1.35 times more volatile than VMware Inc. It trades about 0.06 of its potential returns per unit of risk. VMware Inc is currently generating about 0.05 per unit of risk. If you would invest  17,198  in Salesforce on January 25, 2024 and sell it today you would earn a total of  10,421  from holding Salesforce or generate 60.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.14%
Values	Daily Returns

Salesforce  vs.  VMware Inc

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.

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Salesforce and VMware

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

The idea behind Salesforce and VMware Inc 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 the Share Portfolio module to track or share privately all of your investments from the convenience of any device.