Correlation Between Salesforce and FIRST NIAGARA

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

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

Diversification Opportunities for Salesforce and FIRST NIAGARA

0.48

Correlation Coefficient

Salesforce  FIRST NIAGARA

Very weak diversification

The 3 months correlation between Salesforce and FIRST is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and FIRST NIAGARA FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST NIAGARA FINL 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 FIRST NIAGARA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST NIAGARA FINL has no effect on the direction of Salesforce i.e., Salesforce and FIRST NIAGARA go up and down completely randomly.

Pair Corralation between Salesforce and FIRST NIAGARA

Considering the 90-day investment horizon Salesforce is expected to under-perform the FIRST NIAGARA. In addition to that, Salesforce is 11.9 times more volatile than FIRST NIAGARA FINL. It trades about -0.04 of its total potential returns per unit of risk. FIRST NIAGARA FINL is currently generating about 0.1 per unit of volatility. If you would invest  1,299  in FIRST NIAGARA FINL on February 27, 2025 and sell it today you would earn a total of  10.00  from holding FIRST NIAGARA FINL or generate 0.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	59.68%
Values	Daily Returns

Salesforce  vs.  FIRST NIAGARA FINL

Salesforce

Risk-Adjusted Performance

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.

FIRST NIAGARA FINL

Risk-Adjusted Performance

OK

Over the last 90 days FIRST NIAGARA FINL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FIRST NIAGARA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and FIRST NIAGARA

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

The idea behind Salesforce and FIRST NIAGARA FINL 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.