Correlation Between RCS MediaGroup and ServiceNow

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

By analyzing existing cross correlation between RCS MediaGroup SpA and ServiceNow, you can compare the effects of market volatilities on RCS MediaGroup and ServiceNow 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 RCS MediaGroup with a short position of ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCS MediaGroup and ServiceNow.

Diversification Opportunities for RCS MediaGroup and ServiceNow

0.78

Correlation Coefficient

RCS MediaGroup  ServiceNow

Poor diversification

The 3 months correlation between RCS and ServiceNow is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding RCS MediaGroup SpA and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and RCS MediaGroup 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 RCS MediaGroup SpA are associated (or correlated) with ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of RCS MediaGroup i.e., RCS MediaGroup and ServiceNow go up and down completely randomly.

Pair Corralation between RCS MediaGroup and ServiceNow

Assuming the 90 days horizon RCS MediaGroup is expected to generate 3.73 times less return on investment than ServiceNow. But when comparing it to its historical volatility, RCS MediaGroup SpA is 1.69 times less risky than ServiceNow. It trades about 0.07 of its potential returns per unit of risk. ServiceNow is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  75,481  in ServiceNow on September 23, 2024 and sell it today you would earn a total of  33,644  from holding ServiceNow or generate 44.57% return on investment over 90 days.

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

RCS MediaGroup SpA  vs.  ServiceNow

RCS MediaGroup SpA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, RCS MediaGroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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

Pair Trading with RCS MediaGroup and ServiceNow

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

The idea behind RCS MediaGroup SpA and ServiceNow 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.