Correlation Between Haverty Furniture and ServiceNow

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

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

Diversification Opportunities for Haverty Furniture and ServiceNow

-0.66

Correlation Coefficient

Haverty Furniture  ServiceNow

Excellent diversification

The 3 months correlation between Haverty and ServiceNow is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Haverty Furniture 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 Haverty Furniture Companies 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 Haverty Furniture i.e., Haverty Furniture and ServiceNow go up and down completely randomly.

Pair Corralation between Haverty Furniture and ServiceNow

Assuming the 90 days horizon Haverty Furniture Companies is expected to under-perform the ServiceNow. In addition to that, Haverty Furniture is 1.53 times more volatile than ServiceNow. It trades about -0.03 of its total potential returns per unit of risk. ServiceNow is currently generating about 0.22 per unit of volatility. If you would invest  77,340  in ServiceNow on September 1, 2024 and sell it today you would earn a total of  21,480  from holding ServiceNow or generate 27.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Haverty Furniture Companies  vs.  ServiceNow

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Haverty Furniture is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ServiceNow

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ServiceNow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haverty Furniture and ServiceNow

The main advantage of trading using opposite Haverty Furniture and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haverty Furniture 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 Haverty Furniture Companies 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.