Correlation Between Salesforce and Natural Hlth

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

Diversification Opportunities for Salesforce and Natural Hlth

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Salesforce and Natural is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Natural Hlth Trd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Hlth Trd 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 Natural Hlth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Hlth Trd has no effect on the direction of Salesforce i.e., Salesforce and Natural Hlth go up and down completely randomly.

Pair Corralation between Salesforce and Natural Hlth

Considering the 90-day investment horizon Salesforce is expected to generate 0.68 times more return on investment than Natural Hlth. However, Salesforce is 1.46 times less risky than Natural Hlth. It trades about -0.15 of its potential returns per unit of risk. Natural Hlth Trd is currently generating about -0.44 per unit of risk. If you would invest  16,021  in Salesforce on June 30, 2022 and sell it today you would lose (1,132)  from holding Salesforce or give up 7.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Salesforce  vs.  Natural Hlth Trd

 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

Natural Hlth Trd 
Natural Performance
0 of 100
Over the last 90 days Natural Hlth Trd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Natural Price Channel

Salesforce and Natural Hlth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Salesforce and Natural Hlth

The main advantage of trading using opposite Salesforce and Natural Hlth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, Natural Hlth 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 Natural Hlth will offset losses from the drop in Natural Hlth's long position.
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The idea behind Salesforce and Natural Hlth Trd 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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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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