Correlation Between Knife River and ServiceNow

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

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

Diversification Opportunities for Knife River and ServiceNow

0.87

Correlation Coefficient

Knife River  ServiceNow

Very poor diversification

The 3 months correlation between Knife and ServiceNow is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Knife River 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 Knife River 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 Knife River i.e., Knife River and ServiceNow go up and down completely randomly.

Pair Corralation between Knife River and ServiceNow

Considering the 90-day investment horizon Knife River is expected to generate 12.05 times less return on investment than ServiceNow. In addition to that, Knife River is 1.18 times more volatile than ServiceNow. It trades about 0.0 of its total potential returns per unit of risk. ServiceNow is currently generating about 0.03 per unit of volatility. If you would invest  103,601  in ServiceNow on October 11, 2024 and sell it today you would earn a total of  1,307  from holding ServiceNow or generate 1.26% return on investment over 90 days.

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

Knife River  vs.  ServiceNow

Knife River

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Knife River may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ServiceNow

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, ServiceNow may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Knife River and ServiceNow

The main advantage of trading using opposite Knife River and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River 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 Knife River 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.