Correlation Between ServiceNow and Medical Properties

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

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

Diversification Opportunities for ServiceNow and Medical Properties

-0.27

Correlation Coefficient

ServiceNow  Medical Properties

Very good diversification

The 3 months correlation between ServiceNow and Medical is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Medical Properties Trust, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Properties Trust, and ServiceNow 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 ServiceNow are associated (or correlated) with Medical Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Properties Trust, has no effect on the direction of ServiceNow i.e., ServiceNow and Medical Properties go up and down completely randomly.

Pair Corralation between ServiceNow and Medical Properties

Assuming the 90 days trading horizon ServiceNow is expected to generate 0.68 times more return on investment than Medical Properties. However, ServiceNow is 1.47 times less risky than Medical Properties. It trades about 0.18 of its potential returns per unit of risk. Medical Properties Trust, is currently generating about -0.11 per unit of risk. If you would invest  11,648  in ServiceNow on October 9, 2024 and sell it today you would earn a total of  1,554  from holding ServiceNow or generate 13.34% return on investment over 90 days.

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

ServiceNow  vs.  Medical Properties Trust,

ServiceNow

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ServiceNow sustained solid returns over the last few months and may actually be approaching a breakup point.

Medical Properties Trust,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Properties Trust, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Medical Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ServiceNow and Medical Properties

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

The idea behind ServiceNow and Medical Properties Trust, 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 CEOs Directory module to screen CEOs from public companies around the world.