Correlation Between Applovin Corp and ServiceNow

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

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

Diversification Opportunities for Applovin Corp and ServiceNow

0.43

Correlation Coefficient

Applovin Corp  ServiceNow

Very weak diversification

The 3 months correlation between Applovin and ServiceNow is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Applovin Corp and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Applovin Corp 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 Applovin Corp 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 Applovin Corp i.e., Applovin Corp and ServiceNow go up and down completely randomly.

Pair Corralation between Applovin Corp and ServiceNow

Considering the 90-day investment horizon Applovin Corp is expected to generate 2.55 times more return on investment than ServiceNow. However, Applovin Corp is 2.55 times more volatile than ServiceNow. It trades about -0.02 of its potential returns per unit of risk. ServiceNow is currently generating about -0.17 per unit of risk. If you would invest  33,538  in Applovin Corp on December 30, 2024 and sell it today you would lose (6,300) from holding Applovin Corp or give up 18.78% of portfolio value over 90 days.

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

Applovin Corp  vs.  ServiceNow

Applovin Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applovin Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

ServiceNow

Risk-Adjusted Performance

Very Weak

Over the last 90 days ServiceNow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Applovin Corp and ServiceNow

The main advantage of trading using opposite Applovin Corp and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applovin Corp 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 Applovin Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.