Correlation Between Salesforce and Meta Platforms

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

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

Diversification Opportunities for Salesforce and Meta Platforms

0.9

Correlation Coefficient

Salesforce  Meta Platforms

Almost no diversification

The 3 months correlation between Salesforce and Meta is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Salesforce i.e., Salesforce and Meta Platforms go up and down completely randomly.

Pair Corralation between Salesforce and Meta Platforms

Considering the 90-day investment horizon Salesforce is expected to generate 3.85 times less return on investment than Meta Platforms. But when comparing it to its historical volatility, Salesforce is 1.09 times less risky than Meta Platforms. It trades about 0.02 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  31,852  in Meta Platforms on January 25, 2025 and sell it today you would earn a total of  22,875  from holding Meta Platforms or generate 71.82% return on investment over 90 days.

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

Salesforce  vs.  Meta Platforms

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Meta Platforms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Salesforce and Meta Platforms

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

The idea behind Salesforce and Meta Platforms 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.