Correlation Between Better World and ServiceNow

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

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

Diversification Opportunities for Better World and ServiceNow

-0.34

Correlation Coefficient

Better World  ServiceNow

Very good diversification

The 3 months correlation between Better and ServiceNow is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Better World Acquisition and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Better World 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 Better World Acquisition 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 Better World i.e., Better World and ServiceNow go up and down completely randomly.

Pair Corralation between Better World and ServiceNow

If you would invest  104,140  in ServiceNow on September 28, 2024 and sell it today you would earn a total of  5,771  from holding ServiceNow or generate 5.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Better World Acquisition  vs.  ServiceNow

Better World Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better World Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Better World is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of fairly uncertain basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Better World and ServiceNow

The main advantage of trading using opposite Better World and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Better World 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 Better World Acquisition 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.