Correlation Between ServiceNow and Wienerberger

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

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

Diversification Opportunities for ServiceNow and Wienerberger

-0.16

Correlation Coefficient

ServiceNow  Wienerberger

Good diversification

The 3 months correlation between ServiceNow and Wienerberger is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Wienerberger AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wienerberger AG 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 Wienerberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wienerberger AG has no effect on the direction of ServiceNow i.e., ServiceNow and Wienerberger go up and down completely randomly.

Pair Corralation between ServiceNow and Wienerberger

Considering the 90-day investment horizon ServiceNow is expected to generate 1.45 times more return on investment than Wienerberger. However, ServiceNow is 1.45 times more volatile than Wienerberger AG. It trades about 0.12 of its potential returns per unit of risk. Wienerberger AG is currently generating about 0.03 per unit of risk. If you would invest  36,632  in ServiceNow on September 26, 2024 and sell it today you would earn a total of  73,924  from holding ServiceNow or generate 201.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.52%
Values	Daily Returns

ServiceNow  vs.  Wienerberger AG

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 uncertain basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Wienerberger AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wienerberger AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Wienerberger is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ServiceNow and Wienerberger

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

The idea behind ServiceNow and Wienerberger AG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.