Correlation Between Salesforce and Microsoft Corp

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

Diversification Opportunities for Salesforce and Microsoft Corp

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Salesforce and Microsoft is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp 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 Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of Salesforce i.e., Salesforce and Microsoft Corp go up and down completely randomly.

Pair Corralation between Salesforce and Microsoft Corp

Considering the 90-day investment horizon Salesforce is expected to generate 3.91 times less return on investment than Microsoft Corp. In addition to that, Salesforce is 1.49 times more volatile than Microsoft Corp. It trades about 0.01 of its total potential returns per unit of risk. Microsoft Corp is currently generating about 0.04 per unit of volatility. If you would invest  20,033  in Microsoft Corp on April 7, 2022 and sell it today you would earn a total of  6,252  from holding Microsoft Corp or generate 31.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Salesforce  vs.  Microsoft Corp

 Performance (%) 
      Timeline 
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.

Salesforce Price Channel

Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0096
Payout Ratio
0.26
Last Split Factor
2:1
Forward Annual Dividend Rate
2.48
Dividend Date
2022-09-08
Ex Dividend Date
2022-08-17
Last Split Date
2003-02-18

Microsoft Price Channel

Salesforce and Microsoft Corp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Salesforce and Microsoft Corp

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

Salesforce

Pair trading matchups for Salesforce

The idea behind Salesforce and Microsoft Corp 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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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