Correlation Between ServiceNow and Atlassian Corp

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

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

Diversification Opportunities for ServiceNow and Atlassian Corp

0.92

Correlation Coefficient

ServiceNow  Atlassian Corp

Almost no diversification

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

Pair Corralation between ServiceNow and Atlassian Corp

Considering the 90-day investment horizon ServiceNow is expected to generate 2.38 times less return on investment than Atlassian Corp. But when comparing it to its historical volatility, ServiceNow is 1.85 times less risky than Atlassian Corp. It trades about 0.19 of its potential returns per unit of risk. Atlassian Corp Plc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  16,560  in Atlassian Corp Plc on August 30, 2024 and sell it today you would earn a total of  9,686  from holding Atlassian Corp Plc or generate 58.49% 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.  Atlassian Corp Plc

ServiceNow

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 15 (%) 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.

Atlassian Corp Plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Atlassian Corp Plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Atlassian Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ServiceNow and Atlassian Corp

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

The idea behind ServiceNow and Atlassian Corp Plc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.