Correlation Between STORE ELECTRONIC and ServiceNow

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

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

Diversification Opportunities for STORE ELECTRONIC and ServiceNow

0.22

Correlation Coefficient

STORE ELECTRONIC  ServiceNow

Modest diversification

The 3 months correlation between STORE and ServiceNow is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding STORE ELECTRONIC and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and STORE ELECTRONIC 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 STORE ELECTRONIC 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 STORE ELECTRONIC i.e., STORE ELECTRONIC and ServiceNow go up and down completely randomly.

Pair Corralation between STORE ELECTRONIC and ServiceNow

Assuming the 90 days trading horizon STORE ELECTRONIC is expected to generate 1.09 times less return on investment than ServiceNow. In addition to that, STORE ELECTRONIC is 2.33 times more volatile than ServiceNow. It trades about 0.04 of its total potential returns per unit of risk. ServiceNow is currently generating about 0.11 per unit of volatility. If you would invest  40,730  in ServiceNow on October 20, 2024 and sell it today you would earn a total of  63,690  from holding ServiceNow or generate 156.37% return on investment over 90 days.

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

STORE ELECTRONIC  vs.  ServiceNow

STORE ELECTRONIC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STORE ELECTRONIC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, STORE ELECTRONIC exhibited solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly fragile basic indicators, ServiceNow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STORE ELECTRONIC and ServiceNow

The main advantage of trading using opposite STORE ELECTRONIC and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STORE ELECTRONIC 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 STORE ELECTRONIC 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.