Correlation Between ServiceNow and Tigo Energy

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

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

Diversification Opportunities for ServiceNow and Tigo Energy

-0.9

Correlation Coefficient

ServiceNow  Tigo Energy

Pay attention - limited upside

The 3 months correlation between ServiceNow and Tigo is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Tigo Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigo Energy 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 Tigo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigo Energy has no effect on the direction of ServiceNow i.e., ServiceNow and Tigo Energy go up and down completely randomly.

Pair Corralation between ServiceNow and Tigo Energy

Considering the 90-day investment horizon ServiceNow is expected to generate 0.37 times more return on investment than Tigo Energy. However, ServiceNow is 2.68 times less risky than Tigo Energy. It trades about 0.19 of its potential returns per unit of risk. Tigo Energy is currently generating about -0.19 per unit of risk. If you would invest  89,439  in ServiceNow on September 28, 2024 and sell it today you would earn a total of  20,472  from holding ServiceNow or generate 22.89% return on investment over 90 days.

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

ServiceNow  vs.  Tigo Energy

ServiceNow

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Tigo Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tigo Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ServiceNow and Tigo Energy

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

The idea behind ServiceNow and Tigo Energy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.