Correlation Between ServiceNow and Global E

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

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

Diversification Opportunities for ServiceNow and Global E

0.92

Correlation Coefficient

ServiceNow  Global E

Almost no diversification

The 3 months correlation between ServiceNow and Global is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Global E Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Online 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 Global E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Online has no effect on the direction of ServiceNow i.e., ServiceNow and Global E go up and down completely randomly.

Pair Corralation between ServiceNow and Global E

Considering the 90-day investment horizon ServiceNow is expected to generate 1.35 times less return on investment than Global E. But when comparing it to its historical volatility, ServiceNow is 1.15 times less risky than Global E. It trades about 0.14 of its potential returns per unit of risk. Global E Online is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,339  in Global E Online on September 24, 2024 and sell it today you would earn a total of  2,098  from holding Global E Online or generate 62.83% return on investment over 90 days.

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

ServiceNow  vs.  Global E Online

ServiceNow

Risk-Adjusted Performance

11 of 100

Good

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

Global E Online

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ServiceNow and Global E

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

The idea behind ServiceNow and Global E Online 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.