Correlation Between VIRG NATL and ServiceNow

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

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

Diversification Opportunities for VIRG NATL and ServiceNow

0.29

Correlation Coefficient

VIRG NATL  ServiceNow

Modest diversification

The 3 months correlation between VIRG and ServiceNow is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding VIRG NATL BANKSH and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and VIRG NATL 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 VIRG NATL BANKSH are associated (or correlated) with ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of VIRG NATL i.e., VIRG NATL and ServiceNow go up and down completely randomly.

Pair Corralation between VIRG NATL and ServiceNow

Assuming the 90 days horizon VIRG NATL BANKSH is expected to under-perform the ServiceNow. In addition to that, VIRG NATL is 1.79 times more volatile than ServiceNow. It trades about -0.03 of its total potential returns per unit of risk. ServiceNow is currently generating about 0.2 per unit of volatility. If you would invest  84,650  in ServiceNow on October 20, 2024 and sell it today you would earn a total of  19,770  from holding ServiceNow or generate 23.35% return on investment over 90 days.

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

VIRG NATL BANKSH  vs.  ServiceNow

VIRG NATL BANKSH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIRG NATL BANKSH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VIRG NATL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ServiceNow

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with VIRG NATL and ServiceNow

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

The idea behind VIRG NATL BANKSH and ServiceNow 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.