Correlation Between ServiceNow and GEN Restaurant

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

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

Diversification Opportunities for ServiceNow and GEN Restaurant

-0.33

Correlation Coefficient

ServiceNow  GEN Restaurant

Very good diversification

The 3 months correlation between ServiceNow and GEN is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and GEN Restaurant Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEN Restaurant Group, 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 GEN Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEN Restaurant Group, has no effect on the direction of ServiceNow i.e., ServiceNow and GEN Restaurant go up and down completely randomly.

Pair Corralation between ServiceNow and GEN Restaurant

Considering the 90-day investment horizon ServiceNow is expected to generate 0.63 times more return on investment than GEN Restaurant. However, ServiceNow is 1.6 times less risky than GEN Restaurant. It trades about -0.12 of its potential returns per unit of risk. GEN Restaurant Group, is currently generating about -0.16 per unit of risk. If you would invest  112,048  in ServiceNow on October 9, 2024 and sell it today you would lose (4,343) from holding ServiceNow or give up 3.88% of portfolio value over 90 days.

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

ServiceNow  vs.  GEN Restaurant Group,

ServiceNow

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 10 (%) 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.

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ServiceNow and GEN Restaurant

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

The idea behind ServiceNow and GEN Restaurant Group, 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.