Correlation Between Carters and ServiceNow

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Can any of the company-specific risk be diversified away by investing in both Carters 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 Carters and ServiceNow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carters and ServiceNow, you can compare the effects of market volatilities on Carters 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 Carters with a short position of ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carters and ServiceNow.

Diversification Opportunities for Carters and ServiceNow

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Carters and ServiceNow is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Carters and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Carters 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 Carters 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 Carters i.e., Carters and ServiceNow go up and down completely randomly.

Pair Corralation between Carters and ServiceNow

Considering the 90-day investment horizon Carters is expected to under-perform the ServiceNow. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 1.1 times less risky than ServiceNow. The stock trades about -0.01 of its potential returns per unit of risk. The ServiceNow is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  38,550  in ServiceNow on September 23, 2024 and sell it today you would earn a total of  70,575  from holding ServiceNow or generate 183.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Carters  vs.  ServiceNow

 Performance 
       Timeline  
Carters 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
ServiceNow 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 11 (%) 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.

Carters and ServiceNow Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carters and ServiceNow

The main advantage of trading using opposite Carters and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carters 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 Carters 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.
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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