Correlation Between ServiceNow and Safety Shot

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

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

Diversification Opportunities for ServiceNow and Safety Shot

-0.44

Correlation Coefficient

ServiceNow  Safety Shot

Very good diversification

The 3 months correlation between ServiceNow and Safety is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Safety Shot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Shot 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 Safety Shot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Shot has no effect on the direction of ServiceNow i.e., ServiceNow and Safety Shot go up and down completely randomly.

Pair Corralation between ServiceNow and Safety Shot

Considering the 90-day investment horizon ServiceNow is expected to generate 3.71 times less return on investment than Safety Shot. But when comparing it to its historical volatility, ServiceNow is 11.17 times less risky than Safety Shot. It trades about 0.15 of its potential returns per unit of risk. Safety Shot is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Safety Shot on October 8, 2024 and sell it today you would lose (7.00) from holding Safety Shot or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

ServiceNow  vs.  Safety Shot

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.

Safety Shot

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Shot are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Safety Shot showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ServiceNow and Safety Shot

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

The idea behind ServiceNow and Safety Shot 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.