Correlation Between ServiceNow and Paya Holdings

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

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

Diversification Opportunities for ServiceNow and Paya Holdings

-0.07

Correlation Coefficient

ServiceNow  Paya Holdings

Good diversification

The 3 months correlation between ServiceNow and Paya is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Paya Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paya Holdings 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 Paya Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paya Holdings has no effect on the direction of ServiceNow i.e., ServiceNow and Paya Holdings go up and down completely randomly.

Pair Corralation between ServiceNow and Paya Holdings

If you would invest  92,796  in ServiceNow on October 15, 2024 and sell it today you would earn a total of  9,661  from holding ServiceNow or generate 10.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

ServiceNow  vs.  Paya Holdings

ServiceNow

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, ServiceNow may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Paya Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paya Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Paya Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ServiceNow and Paya Holdings

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

The idea behind ServiceNow and Paya Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.