Correlation Between Canlan Ice and ServiceNow

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

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

Diversification Opportunities for Canlan Ice and ServiceNow

0.57

Correlation Coefficient

Canlan Ice  ServiceNow

Very weak diversification

The 3 months correlation between Canlan and ServiceNow is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Canlan Ice 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 Canlan Ice Sports 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 Canlan Ice i.e., Canlan Ice and ServiceNow go up and down completely randomly.

Pair Corralation between Canlan Ice and ServiceNow

Assuming the 90 days horizon Canlan Ice is expected to generate 14.27 times less return on investment than ServiceNow. But when comparing it to its historical volatility, Canlan Ice Sports is 11.24 times less risky than ServiceNow. It trades about 0.18 of its potential returns per unit of risk. ServiceNow is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  88,613  in ServiceNow on September 12, 2024 and sell it today you would earn a total of  24,171  from holding ServiceNow or generate 27.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Canlan Ice Sports  vs.  ServiceNow

Canlan Ice Sports

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice 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. 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 Canlan Ice and ServiceNow

The main advantage of trading using opposite Canlan Ice and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canlan Ice 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 Canlan Ice Sports 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.