Correlation Between ServiceNow and One Liberty

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

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

Diversification Opportunities for ServiceNow and One Liberty

0.64

Correlation Coefficient

ServiceNow  One Liberty

Poor diversification

The 3 months correlation between ServiceNow and One is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and One Liberty Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Liberty Properties 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 One Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Liberty Properties has no effect on the direction of ServiceNow i.e., ServiceNow and One Liberty go up and down completely randomly.

Pair Corralation between ServiceNow and One Liberty

Considering the 90-day investment horizon ServiceNow is expected to generate 1.07 times more return on investment than One Liberty. However, ServiceNow is 1.07 times more volatile than One Liberty Properties. It trades about -0.12 of its potential returns per unit of risk. One Liberty Properties is currently generating about -0.26 per unit of risk. If you would invest  112,048  in ServiceNow on October 8, 2024 and sell it today you would lose (4,343) from holding ServiceNow or give up 3.88% of portfolio value over 90 days.

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

ServiceNow  vs.  One Liberty Properties

ServiceNow

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 11 (%) 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.

One Liberty Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days One Liberty Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, One Liberty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ServiceNow and One Liberty

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

The idea behind ServiceNow and One Liberty Properties 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.