Correlation Between ServiceNow and ARHT Media

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

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

Diversification Opportunities for ServiceNow and ARHT Media

0.12

Correlation Coefficient

ServiceNow  ARHT Media

Average diversification

The 3 months correlation between ServiceNow and ARHT is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and ARHT Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARHT Media 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 ARHT Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARHT Media has no effect on the direction of ServiceNow i.e., ServiceNow and ARHT Media go up and down completely randomly.

Pair Corralation between ServiceNow and ARHT Media

Considering the 90-day investment horizon ServiceNow is expected to generate 0.47 times more return on investment than ARHT Media. However, ServiceNow is 2.14 times less risky than ARHT Media. It trades about 0.23 of its potential returns per unit of risk. ARHT Media is currently generating about 0.02 per unit of risk. If you would invest  88,613  in ServiceNow on September 12, 2024 and sell it today you would earn a total of  24,171  from holding ServiceNow or generate 27.28% return on investment over 90 days.

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

ServiceNow  vs.  ARHT Media

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 conflicting basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

ARHT Media

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARHT Media are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ARHT Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ServiceNow and ARHT Media

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

The idea behind ServiceNow and ARHT Media 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.