Correlation Between Salesforce and Consolidated Communications

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

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

Diversification Opportunities for Salesforce and Consolidated Communications

0.66

Correlation Coefficient

Salesforce  Consolidated Communications

Poor diversification

The 3 months correlation between Salesforce and Consolidated is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Consolidated Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications 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 Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of Salesforce i.e., Salesforce and Consolidated Communications go up and down completely randomly.

Pair Corralation between Salesforce and Consolidated Communications

Considering the 90-day investment horizon Salesforce is expected to generate 5.81 times more return on investment than Consolidated Communications. However, Salesforce is 5.81 times more volatile than Consolidated Communications. It trades about 0.05 of its potential returns per unit of risk. Consolidated Communications is currently generating about 0.13 per unit of risk. If you would invest  28,617  in Salesforce on August 18, 2024 and sell it today you would earn a total of  3,909  from holding Salesforce or generate 13.66% return on investment over 90 days.

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

Salesforce  vs.  Consolidated Communications

Salesforce

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Consolidated Communications

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Consolidated Communications is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Salesforce and Consolidated Communications

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

The idea behind Salesforce and Consolidated Communications 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.