Correlation Between ServiceNow and Lucid

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

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

Diversification Opportunities for ServiceNow and Lucid

-0.67

Correlation Coefficient

ServiceNow  Lucid

Excellent diversification

The 3 months correlation between ServiceNow and Lucid is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Lucid Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid 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 Lucid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucid Group has no effect on the direction of ServiceNow i.e., ServiceNow and Lucid go up and down completely randomly.

Pair Corralation between ServiceNow and Lucid

Considering the 90-day investment horizon ServiceNow is expected to generate 3.24 times less return on investment than Lucid. But when comparing it to its historical volatility, ServiceNow is 2.29 times less risky than Lucid. It trades about 0.24 of its potential returns per unit of risk. Lucid Group is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Lucid Group on September 20, 2024 and sell it today you would earn a total of  66.00  from holding Lucid Group or generate 31.43% return on investment over 90 days.

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

ServiceNow  vs.  Lucid Group

ServiceNow

Risk-Adjusted Performance

13 of 100

OK

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.

Lucid Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucid Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ServiceNow and Lucid

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

The idea behind ServiceNow and Lucid 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.