Correlation Between ServiceNow and BW Offshore

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

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

Diversification Opportunities for ServiceNow and BW Offshore

0.51

Correlation Coefficient

ServiceNow  BW Offshore

Very weak diversification

The 3 months correlation between ServiceNow and BWOFY is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore Limited has no effect on the direction of ServiceNow i.e., ServiceNow and BW Offshore go up and down completely randomly.

Pair Corralation between ServiceNow and BW Offshore

Considering the 90-day investment horizon ServiceNow is expected to generate 3.54 times more return on investment than BW Offshore. However, ServiceNow is 3.54 times more volatile than BW Offshore Limited. It trades about 0.28 of its potential returns per unit of risk. BW Offshore Limited is currently generating about 0.29 per unit of risk. If you would invest  100,534  in ServiceNow on September 19, 2024 and sell it today you would earn a total of  10,938  from holding ServiceNow or generate 10.88% return on investment over 90 days.

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

ServiceNow  vs.  BW Offshore Limited

ServiceNow

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 14 (%) 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.

BW Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BW Offshore is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ServiceNow and BW Offshore

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

The idea behind ServiceNow and BW Offshore Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.