Correlation Between Salesforce and First Financial

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

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

Diversification Opportunities for Salesforce and First Financial

-0.14

Correlation Coefficient

Salesforce  First Financial

Good diversification

The 3 months correlation between Salesforce and First is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and First Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial has no effect on the direction of Salesforce i.e., Salesforce and First Financial go up and down completely randomly.

Pair Corralation between Salesforce and First Financial

Considering the 90-day investment horizon Salesforce is expected to under-perform the First Financial. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.04 times less risky than First Financial. The stock trades about -0.01 of its potential returns per unit of risk. The First Financial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,898  in First Financial on May 1, 2025 and sell it today you would earn a total of  623.00  from holding First Financial or generate 12.72% return on investment over 90 days.

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

Salesforce  vs.  First Financial

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 Financial

Risk-Adjusted Performance

OK

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

Pair Trading with Salesforce and First Financial

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

The idea behind Salesforce and First Financial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..