Correlation Between ServiceNow and Harmony Gold

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

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

Diversification Opportunities for ServiceNow and Harmony Gold

-0.16

Correlation Coefficient

ServiceNow  Harmony Gold

Good diversification

The 3 months correlation between ServiceNow and Harmony is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining 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 Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of ServiceNow i.e., ServiceNow and Harmony Gold go up and down completely randomly.

Pair Corralation between ServiceNow and Harmony Gold

Considering the 90-day investment horizon ServiceNow is expected to generate 0.49 times more return on investment than Harmony Gold. However, ServiceNow is 2.05 times less risky than Harmony Gold. It trades about 0.24 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.02 per unit of risk. If you would invest  88,613  in ServiceNow on September 12, 2024 and sell it today you would earn a total of  26,138  from holding ServiceNow or generate 29.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

ServiceNow  vs.  Harmony Gold Mining

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.

Harmony Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmony Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Harmony Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ServiceNow and Harmony Gold

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

The idea behind ServiceNow and Harmony Gold Mining 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.