Correlation Between ServiceNow and Sage Group
Can any of the company-specific risk be diversified away by investing in both ServiceNow and Sage Group 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 Sage Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and Sage Group PLC, you can compare the effects of market volatilities on ServiceNow and Sage Group 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 Sage Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and Sage Group.
Diversification Opportunities for ServiceNow and Sage Group
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ServiceNow and Sage is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group PLC 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 Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of ServiceNow i.e., ServiceNow and Sage Group go up and down completely randomly.
Pair Corralation between ServiceNow and Sage Group
Considering the 90-day investment horizon ServiceNow is expected to generate 0.67 times more return on investment than Sage Group. However, ServiceNow is 1.5 times less risky than Sage Group. It trades about 0.25 of its potential returns per unit of risk. Sage Group PLC is currently generating about 0.16 per unit of risk. If you would invest 85,558 in ServiceNow on September 8, 2024 and sell it today you would earn a total of 26,876 from holding ServiceNow or generate 31.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
ServiceNow vs. Sage Group PLC
Performance |
Timeline |
ServiceNow |
Sage Group PLC |
ServiceNow and Sage Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ServiceNow and Sage Group
The main advantage of trading using opposite ServiceNow and Sage Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, Sage Group 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 Sage Group will offset losses from the drop in Sage Group's long position.ServiceNow vs. Autodesk | ServiceNow vs. Intuit Inc | ServiceNow vs. Zoom Video Communications | ServiceNow vs. Snowflake |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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