Correlation Between ServiceNow and Coca Cola

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

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

Diversification Opportunities for ServiceNow and Coca Cola

-0.8

Correlation Coefficient

ServiceNow  Coca Cola

Pay attention - limited upside

The 3 months correlation between ServiceNow and Coca is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of ServiceNow i.e., ServiceNow and Coca Cola go up and down completely randomly.

Pair Corralation between ServiceNow and Coca Cola

Considering the 90-day investment horizon ServiceNow is expected to under-perform the Coca Cola. But the stock apears to be less risky and, when comparing its historical volatility, ServiceNow is 1.04 times less risky than Coca Cola. The stock trades about -0.38 of its potential returns per unit of risk. The The Coca Cola is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  6,335  in The Coca Cola on December 5, 2024 and sell it today you would earn a total of  684.00  from holding The Coca Cola or generate 10.8% return on investment over 90 days.

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

ServiceNow  vs.  The Coca Cola

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.

Coca Cola

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ServiceNow and Coca Cola

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

The idea behind ServiceNow and The Coca Cola 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.