Correlation Between ServiceNow and Beyond Oil

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

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

Diversification Opportunities for ServiceNow and Beyond Oil

-0.1

Correlation Coefficient

ServiceNow  Beyond Oil

Good diversification

The 3 months correlation between ServiceNow and Beyond is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Beyond Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beyond Oil 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 Beyond Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beyond Oil has no effect on the direction of ServiceNow i.e., ServiceNow and Beyond Oil go up and down completely randomly.

Pair Corralation between ServiceNow and Beyond Oil

Considering the 90-day investment horizon ServiceNow is expected to under-perform the Beyond Oil. But the stock apears to be less risky and, when comparing its historical volatility, ServiceNow is 3.88 times less risky than Beyond Oil. The stock trades about -0.06 of its potential returns per unit of risk. The Beyond Oil is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Beyond Oil on October 24, 2024 and sell it today you would earn a total of  47.00  from holding Beyond Oil or generate 46.53% return on investment over 90 days.

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

ServiceNow  vs.  Beyond Oil

ServiceNow

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 9 (%) 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.

Beyond Oil

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beyond Oil are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Beyond Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ServiceNow and Beyond Oil

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

The idea behind ServiceNow and Beyond Oil 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.