Correlation Between ServiceNow and Sprinklr

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

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

Diversification Opportunities for ServiceNow and Sprinklr

0.28

Correlation Coefficient

ServiceNow  Sprinklr

Modest diversification

The 3 months correlation between ServiceNow and Sprinklr is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Sprinklr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprinklr 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 Sprinklr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprinklr has no effect on the direction of ServiceNow i.e., ServiceNow and Sprinklr go up and down completely randomly.

Pair Corralation between ServiceNow and Sprinklr

Considering the 90-day investment horizon ServiceNow is expected to generate 0.66 times more return on investment than Sprinklr. However, ServiceNow is 1.52 times less risky than Sprinklr. It trades about 0.23 of its potential returns per unit of risk. Sprinklr is currently generating about 0.05 per unit of risk. If you would invest  83,540  in ServiceNow on September 5, 2024 and sell it today you would earn a total of  22,192  from holding ServiceNow or generate 26.56% return on investment over 90 days.

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

ServiceNow  vs.  Sprinklr

ServiceNow

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 18 (%) 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.

Sprinklr

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sprinklr are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Sprinklr may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ServiceNow and Sprinklr

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

The idea behind ServiceNow and Sprinklr 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.