Correlation Between ServiceNow and CAVU Resources

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

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

Diversification Opportunities for ServiceNow and CAVU Resources

0.43

Correlation Coefficient

ServiceNow  CAVU Resources

Very weak diversification

The 3 months correlation between ServiceNow and CAVU is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and CAVU Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAVU Resources 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 CAVU Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAVU Resources has no effect on the direction of ServiceNow i.e., ServiceNow and CAVU Resources go up and down completely randomly.

Pair Corralation between ServiceNow and CAVU Resources

Considering the 90-day investment horizon ServiceNow is expected to under-perform the CAVU Resources. But the stock apears to be less risky and, when comparing its historical volatility, ServiceNow is 6.79 times less risky than CAVU Resources. The stock trades about -0.15 of its potential returns per unit of risk. The CAVU Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.04  in CAVU Resources on December 29, 2024 and sell it today you would lose (0.01) from holding CAVU Resources or give up 25.0% of portfolio value over 90 days.

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

ServiceNow  vs.  CAVU Resources

ServiceNow

Risk-Adjusted Performance

Very Weak

Over the last 90 days ServiceNow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CAVU Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CAVU Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CAVU Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ServiceNow and CAVU Resources

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

The idea behind ServiceNow and CAVU Resources 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.