Correlation Between Alliance Data and Salesforce

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

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

Diversification Opportunities for Alliance Data and Salesforce

0.2

Correlation Coefficient

Alliance Data  Salesforce

Modest diversification

The 3 months correlation between Alliance and Salesforce is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Alliance Data 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 Alliance Data Systems 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 Alliance Data i.e., Alliance Data and Salesforce go up and down completely randomly.

Pair Corralation between Alliance Data and Salesforce

Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.33 times more return on investment than Salesforce. However, Alliance Data is 1.33 times more volatile than Salesforce. It trades about 0.16 of its potential returns per unit of risk. Salesforce is currently generating about 0.03 per unit of risk. If you would invest  4,103  in Alliance Data Systems on April 17, 2025 and sell it today you would earn a total of  1,055  from holding Alliance Data Systems or generate 25.71% return on investment over 90 days.

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

Alliance Data Systems  vs.  Salesforce

Alliance Data Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Alliance Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Salesforce

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Salesforce is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alliance Data and Salesforce

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

The idea behind Alliance Data Systems 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.