Correlation Between Salesforce and Epigenomics

Can any of the company-specific risk be diversified away by investing in both Salesforce and Epigenomics 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 Epigenomics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Salesforce and Epigenomics AG, you can compare the effects of market volatilities on Salesforce and Epigenomics 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 Epigenomics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Epigenomics.

Diversification Opportunities for Salesforce and Epigenomics

-0.08

Correlation Coefficient

Salesforce  Epigenomics

Good diversification

The 3 months correlation between Salesforce and Epigenomics is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Epigenomics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epigenomics AG 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 Epigenomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epigenomics AG has no effect on the direction of Salesforce i.e., Salesforce and Epigenomics go up and down completely randomly.

Pair Corralation between Salesforce and Epigenomics

Considering the 90-day investment horizon Salesforce is expected to generate 15.78 times less return on investment than Epigenomics. But when comparing it to its historical volatility, Salesforce is 21.62 times less risky than Epigenomics. It trades about 0.09 of its potential returns per unit of risk. Epigenomics AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Epigenomics AG on January 28, 2024 and sell it today you would lose (20.00) from holding Epigenomics AG or give up 28.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Salesforce  vs.  Epigenomics AG

Salesforce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Epigenomics AG

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Epigenomics AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Epigenomics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Epigenomics

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

The idea behind Salesforce and Epigenomics AG 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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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.