Correlation Between EGain and Salesforce

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

By analyzing existing cross correlation between eGain and Salesforce, you can compare the effects of market volatilities on EGain and Salesforce 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 EGain with a short position of Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of EGain and Salesforce.

Diversification Opportunities for EGain and Salesforce

0.79

Correlation Coefficient

EGain  Salesforce

Poor diversification

The 3 months correlation between EGain and Salesforce is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding eGain and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and EGain 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 eGain are associated (or correlated) with Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of EGain i.e., EGain and Salesforce go up and down completely randomly.

Pair Corralation between EGain and Salesforce

Given the investment horizon of 90 days eGain is expected to generate 1.28 times more return on investment than Salesforce. However, EGain is 1.28 times more volatile than Salesforce. It trades about 0.06 of its potential returns per unit of risk. Salesforce is currently generating about 0.03 per unit of risk. If you would invest  534.00  in eGain on September 26, 2024 and sell it today you would earn a total of  20.00  from holding eGain or generate 3.75% return on investment over 90 days.

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

eGain  vs.  Salesforce

eGain

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in eGain are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, EGain displayed solid returns over the last few months and may actually be approaching a breakup point.

Salesforce

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 13 (%) 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.

Pair Trading with EGain and Salesforce

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

The idea behind eGain and Salesforce 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.