Correlation Between Workday and Salesforce
Can any of the company-specific risk be diversified away by investing in both Workday 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 Workday and Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workday and Salesforce, you can compare the effects of market volatilities on Workday 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 Workday with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workday and Salesforce.
Diversification Opportunities for Workday and Salesforce
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Workday and Salesforce is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Workday and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Workday 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 Workday 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 Workday i.e., Workday and Salesforce go up and down completely randomly.
Pair Corralation between Workday and Salesforce
Given the investment horizon of 90 days Workday is expected to generate 0.39 times more return on investment than Salesforce. However, Workday is 2.54 times less risky than Salesforce. It trades about -0.51 of its potential returns per unit of risk. Salesforce is currently generating about -0.26 per unit of risk. If you would invest 27,568 in Workday on January 24, 2024 and sell it today you would lose (2,215) from holding Workday or give up 8.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Workday vs. Salesforce
Performance |
| Timeline |
| Workday |
| Salesforce |
Workday and Salesforce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Workday and Salesforce
The main advantage of trading using opposite Workday and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workday 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.The idea behind Workday 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.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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