Correlation Between ServiceNow and International Media

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

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

Diversification Opportunities for ServiceNow and International Media

-0.51

Correlation Coefficient

ServiceNow  International Media

Excellent diversification

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

Pair Corralation between ServiceNow and International Media

If you would invest  93,736  in ServiceNow on September 20, 2024 and sell it today you would earn a total of  17,736  from holding ServiceNow or generate 18.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

ServiceNow  vs.  International Media Acquisitio

ServiceNow

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 13 (%) 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.

International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Media Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, International Media is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ServiceNow and International Media

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

The idea behind ServiceNow and International Media Acquisition 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.