Correlation Between Salesforce and GM
Can any of the company-specific risk be diversified away by investing in both Salesforce and GM 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 GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salesforce and General Motors, you can compare the effects of market volatilities on Salesforce and GM 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 GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and GM.
Diversification Opportunities for Salesforce and GM
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Salesforce and GM is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Salesforce i.e., Salesforce and GM go up and down completely randomly.
Pair Corralation between Salesforce and GM
Considering the 90-day investment horizon Salesforce is expected to under-perform the GM. In addition to that, Salesforce is 1.61 times more volatile than General Motors. It trades about -0.3 of its total potential returns per unit of risk. General Motors is currently generating about -0.09 per unit of volatility. If you would invest 4,342 in General Motors on January 21, 2024 and sell it today you would lose (105.00) from holding General Motors or give up 2.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Salesforce vs. General Motors
Performance |
| Timeline |
| Salesforce |
| General Motors |
Salesforce and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salesforce and GM
The main advantage of trading using opposite Salesforce and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.| Salesforce vs. Zoom Video Communications | Salesforce vs. C3 Ai Inc | Salesforce vs. Shopify | Salesforce vs. Workday |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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