Correlation Between ServiceNow and M3 Brigade

Can any of the company-specific risk be diversified away by investing in both ServiceNow and M3 Brigade 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 M3 Brigade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ServiceNow and M3 Brigade Acquisition V, you can compare the effects of market volatilities on ServiceNow and M3 Brigade 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 M3 Brigade. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and M3 Brigade.

Diversification Opportunities for ServiceNow and M3 Brigade

-0.41

Correlation Coefficient

ServiceNow  M3 Brigade

Very good diversification

The 3 months correlation between ServiceNow and MBAVW is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and M3 Brigade Acquisition V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Brigade Acquisition 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 M3 Brigade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Brigade Acquisition has no effect on the direction of ServiceNow i.e., ServiceNow and M3 Brigade go up and down completely randomly.

Pair Corralation between ServiceNow and M3 Brigade

Considering the 90-day investment horizon ServiceNow is expected to generate 6.33 times less return on investment than M3 Brigade. But when comparing it to its historical volatility, ServiceNow is 4.96 times less risky than M3 Brigade. It trades about 0.09 of its potential returns per unit of risk. M3 Brigade Acquisition V is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13.00  in M3 Brigade Acquisition V on October 4, 2024 and sell it today you would earn a total of  5.00  from holding M3 Brigade Acquisition V or generate 38.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	13.6%
Values	Daily Returns

ServiceNow  vs.  M3 Brigade Acquisition V

ServiceNow

Risk-Adjusted Performance

10 of 100

OK

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 weak basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

M3 Brigade Acquisition

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days M3 Brigade Acquisition V has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, M3 Brigade showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ServiceNow and M3 Brigade

The main advantage of trading using opposite ServiceNow and M3 Brigade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, M3 Brigade 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 M3 Brigade will offset losses from the drop in M3 Brigade's long position.

The idea behind ServiceNow and M3 Brigade Acquisition V 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.