Correlation Between ServiceNow and AES Corp

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

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

Diversification Opportunities for ServiceNow and AES Corp

-0.17

Correlation Coefficient

ServiceNow  AES Corp

Good diversification

The 3 months correlation between ServiceNow and AES is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and AES Corp Unit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp Unit 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 AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp Unit has no effect on the direction of ServiceNow i.e., ServiceNow and AES Corp go up and down completely randomly.

Pair Corralation between ServiceNow and AES Corp

If you would invest  83,586  in ServiceNow on September 2, 2024 and sell it today you would earn a total of  21,358  from holding ServiceNow or generate 25.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

ServiceNow  vs.  AES Corp Unit

ServiceNow

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

AES Corp Unit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AES Corp Unit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AES Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ServiceNow and AES Corp

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

The idea behind ServiceNow and AES Corp Unit 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.