Correlation Between ServiceNow and LivePerson

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

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

Diversification Opportunities for ServiceNow and LivePerson

-0.64

Correlation Coefficient

ServiceNow  LivePerson

Excellent diversification

The 3 months correlation between ServiceNow and LivePerson is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and LivePerson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivePerson 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 LivePerson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivePerson has no effect on the direction of ServiceNow i.e., ServiceNow and LivePerson go up and down completely randomly.

Pair Corralation between ServiceNow and LivePerson

Considering the 90-day investment horizon ServiceNow is expected to generate 0.23 times more return on investment than LivePerson. However, ServiceNow is 4.34 times less risky than LivePerson. It trades about 0.22 of its potential returns per unit of risk. LivePerson is currently generating about -0.02 per unit of risk. If you would invest  79,295  in ServiceNow on September 5, 2024 and sell it today you would earn a total of  26,437  from holding ServiceNow or generate 33.34% return on investment over 90 days.

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

ServiceNow  vs.  LivePerson

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.

LivePerson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LivePerson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ServiceNow and LivePerson

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

The idea behind ServiceNow and LivePerson 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.