Correlation Between ServiceNow and Beneficient

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

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

Diversification Opportunities for ServiceNow and Beneficient

-0.67

Correlation Coefficient

ServiceNow  Beneficient

Excellent diversification

The 3 months correlation between ServiceNow and Beneficient is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Beneficient Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beneficient Class 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 Beneficient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beneficient Class has no effect on the direction of ServiceNow i.e., ServiceNow and Beneficient go up and down completely randomly.

Pair Corralation between ServiceNow and Beneficient

Considering the 90-day investment horizon ServiceNow is expected to generate 0.15 times more return on investment than Beneficient. However, ServiceNow is 6.54 times less risky than Beneficient. It trades about 0.23 of its potential returns per unit of risk. Beneficient Class A is currently generating about -0.04 per unit of risk. If you would invest  83,540  in ServiceNow on September 5, 2024 and sell it today you would earn a total of  22,192  from holding ServiceNow or generate 26.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

ServiceNow  vs.  Beneficient Class A

ServiceNow

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 18 (%) 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.

Beneficient Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beneficient Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ServiceNow and Beneficient

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

The idea behind ServiceNow and Beneficient Class A 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.