Correlation Between China Index and Salesforce

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Can any of the company-specific risk be diversified away by investing in both China Index 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 China Index and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Index Holdings and Salesforce, you can compare the effects of market volatilities on China Index 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 China Index with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Index and Salesforce.

Diversification Opportunities for China Index and Salesforce

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between China and Salesforce is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Index Holdings and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and China Index 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 China Index Holdings 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 China Index i.e., China Index and Salesforce go up and down completely randomly.

Pair Corralation between China Index and Salesforce

Considering the 90-day investment horizon China Index Holdings is expected to under-perform the Salesforce. In addition to that, China Index is 1.61 times more volatile than Salesforce. It trades about -0.03 of its total potential returns per unit of risk. Salesforce is currently generating about 0.01 per unit of volatility. If you would invest  19,772  in Salesforce on March 28, 2022 and sell it today you would lose (1,180)  from holding Salesforce or give up 5.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

China Index Holdings  vs.  Salesforce

 Performance (%) 
      Timeline 
China Index Holdings 
China Performance
0 of 100
Over the last 90 days China Index Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Price Channel

Salesforce 
Salesforce Performance
0 of 100
Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Structure and Payout Changes

Last Split Factor
4:1
Last Split Date
2013-04-18

Salesforce Price Channel

China Index and Salesforce Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with China Index and Salesforce

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

China Index Holdings

Pair trading matchups for China Index

The idea behind China Index Holdings 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.

Salesforce

Pair trading matchups for Salesforce

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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