Correlation Between Salesforce and Newell Brands

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

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

Diversification Opportunities for Salesforce and Newell Brands

0.18

Correlation Coefficient

Salesforce  Newell Brands

Average diversification

The 3 months correlation between Salesforce and Newell is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 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 Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of Salesforce i.e., Salesforce and Newell Brands go up and down completely randomly.

Pair Corralation between Salesforce and Newell Brands

Considering the 90-day investment horizon Salesforce is expected to under-perform the Newell Brands. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.79 times less risky than Newell Brands. The stock trades about -0.23 of its potential returns per unit of risk. The Newell Brands is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  723.00  in Newell Brands on February 5, 2024 and sell it today you would earn a total of  43.00  from holding Newell Brands or generate 5.95% return on investment over 90 days.

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

Salesforce  vs.  Newell Brands

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.

Newell Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newell Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Newell Brands is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Salesforce and Newell Brands

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

The idea behind Salesforce and Newell Brands 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.