Correlation Between ServiceNow and ORACLE

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

By analyzing existing cross correlation between ServiceNow and ORACLE P 45, you can compare the effects of market volatilities on ServiceNow and ORACLE 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 ORACLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and ORACLE.

Diversification Opportunities for ServiceNow and ORACLE

0.15

Correlation Coefficient

ServiceNow  ORACLE

Average diversification

The 3 months correlation between ServiceNow and ORACLE is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and ORACLE P 45 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORACLE P 45 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 ORACLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORACLE P 45 has no effect on the direction of ServiceNow i.e., ServiceNow and ORACLE go up and down completely randomly.

Pair Corralation between ServiceNow and ORACLE

Considering the 90-day investment horizon ServiceNow is expected to under-perform the ORACLE. In addition to that, ServiceNow is 2.19 times more volatile than ORACLE P 45. It trades about -0.07 of its total potential returns per unit of risk. ORACLE P 45 is currently generating about -0.08 per unit of volatility. If you would invest  8,822  in ORACLE P 45 on November 29, 2024 and sell it today you would lose (432.00) from holding ORACLE P 45 or give up 4.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

ServiceNow  vs.  ORACLE P 45

ServiceNow

Risk-Adjusted Performance

Very Weak

Over the last 90 days ServiceNow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

ORACLE P 45

Risk-Adjusted Performance

Very Weak

Over the last 90 days ORACLE P 45 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ORACLE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ServiceNow and ORACLE

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

The idea behind ServiceNow and ORACLE P 45 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.