Correlation Between ServiceNow and Neogrid Participaes

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

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

Diversification Opportunities for ServiceNow and Neogrid Participaes

-0.11

Correlation Coefficient

ServiceNow  Neogrid Participaes

Good diversification

The 3 months correlation between ServiceNow and Neogrid is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Neogrid Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neogrid Participaes and ServiceNow 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 ServiceNow are associated (or correlated) with Neogrid Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neogrid Participaes has no effect on the direction of ServiceNow i.e., ServiceNow and Neogrid Participaes go up and down completely randomly.

Pair Corralation between ServiceNow and Neogrid Participaes

Assuming the 90 days trading horizon ServiceNow is expected to generate 0.49 times more return on investment than Neogrid Participaes. However, ServiceNow is 2.03 times less risky than Neogrid Participaes. It trades about 0.29 of its potential returns per unit of risk. Neogrid Participaes SA is currently generating about 0.02 per unit of risk. If you would invest  9,800  in ServiceNow on September 13, 2024 and sell it today you would earn a total of  3,990  from holding ServiceNow or generate 40.71% return on investment over 90 days.

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

ServiceNow  vs.  Neogrid Participaes SA

ServiceNow

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ServiceNow sustained solid returns over the last few months and may actually be approaching a breakup point.

Neogrid Participaes

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neogrid Participaes SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Neogrid Participaes is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ServiceNow and Neogrid Participaes

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

The idea behind ServiceNow and Neogrid Participaes SA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.