Correlation Between Thor Industries and ServiceNow

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

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

Diversification Opportunities for Thor Industries and ServiceNow

-0.37

Correlation Coefficient

Thor Industries  ServiceNow

Very good diversification

The 3 months correlation between Thor and ServiceNow is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Thor Industries and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Thor Industries 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 Thor Industries 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 Thor Industries i.e., Thor Industries and ServiceNow go up and down completely randomly.

Pair Corralation between Thor Industries and ServiceNow

Considering the 90-day investment horizon Thor Industries is expected to generate 7.0 times less return on investment than ServiceNow. In addition to that, Thor Industries is 1.01 times more volatile than ServiceNow. It trades about 0.02 of its total potential returns per unit of risk. ServiceNow is currently generating about 0.14 per unit of volatility. If you would invest  75,650  in ServiceNow on October 20, 2024 and sell it today you would earn a total of  31,498  from holding ServiceNow or generate 41.64% return on investment over 90 days.

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

Thor Industries  vs.  ServiceNow

Thor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Thor Industries is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ServiceNow

Risk-Adjusted Performance

11 of 100

OK

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

Pair Trading with Thor Industries and ServiceNow

The main advantage of trading using opposite Thor Industries and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thor Industries 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 Thor Industries 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.