Correlation Between ServiceNow and SMUCKER

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

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

Diversification Opportunities for ServiceNow and SMUCKER

0.06

Correlation Coefficient

ServiceNow  SMUCKER

Significant diversification

The 3 months correlation between ServiceNow and SMUCKER is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and SMUCKER J M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMUCKER J M 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 SMUCKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMUCKER J M has no effect on the direction of ServiceNow i.e., ServiceNow and SMUCKER go up and down completely randomly.

Pair Corralation between ServiceNow and SMUCKER

Considering the 90-day investment horizon ServiceNow is expected to generate 1.81 times more return on investment than SMUCKER. However, ServiceNow is 1.81 times more volatile than SMUCKER J M. It trades about 0.21 of its potential returns per unit of risk. SMUCKER J M is currently generating about -0.12 per unit of risk. If you would invest  89,246  in ServiceNow on September 16, 2024 and sell it today you would earn a total of  22,864  from holding ServiceNow or generate 25.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.15%
Values	Daily Returns

ServiceNow  vs.  SMUCKER J M

ServiceNow

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 16 (%) 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.

SMUCKER J M

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMUCKER J M has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SMUCKER J M investors.

Pair Trading with ServiceNow and SMUCKER

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

The idea behind ServiceNow and SMUCKER J M 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.