Correlation Between Lumen Technologies and Salesforce

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

Diversification Opportunities for Lumen Technologies and Salesforce

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Lumen and Salesforce is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Lumen Technologies 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 Lumen Technologies 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 Lumen Technologies i.e., Lumen Technologies and Salesforce go up and down completely randomly.

Pair Corralation between Lumen Technologies and Salesforce

Given the investment horizon of 90 days Lumen Technologies is expected to generate 1.26 times more return on investment than Salesforce. However, Lumen Technologies is 1.26 times more volatile than Salesforce. It trades about -0.02 of its potential returns per unit of risk. Salesforce is currently generating about -0.02 per unit of risk. If you would invest  903.00  in Lumen Technologies on September 3, 2022 and sell it today you would lose (344.00)  from holding Lumen Technologies or give up 38.1% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Lumen Technologies  vs.  Salesforce

 Performance (%) 
       Timeline  
Lumen Technologies 
Lumen Performance
0 of 100
Over the last 90 days Lumen Technologies 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 primary indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Lumen 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 relatively steady basic indicators, Salesforce is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Salesforce Price Channel

Lumen Technologies and Salesforce Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lumen Technologies and Salesforce

The main advantage of trading using opposite Lumen Technologies and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumen Technologies 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.
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The idea behind Lumen Technologies 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.
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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