Correlation Between ServiceNow and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ServiceNow and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and Dow Jones Industrial, you can compare the effects of market volatilities on ServiceNow and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and Dow Jones.
Diversification Opportunities for ServiceNow and Dow Jones
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ServiceNow and Dow is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of ServiceNow i.e., ServiceNow and Dow Jones go up and down completely randomly.
Pair Corralation between ServiceNow and Dow Jones
Assuming the 90 days horizon ServiceNow is expected to generate 2.76 times more return on investment than Dow Jones. However, ServiceNow is 2.76 times more volatile than Dow Jones Industrial. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 38,995 in ServiceNow on September 3, 2024 and sell it today you would earn a total of 59,825 from holding ServiceNow or generate 153.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.02% |
| Values | Daily Returns |
ServiceNow vs. Dow Jones Industrial
Performance |
| Timeline |
ServiceNow and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ServiceNow
Pair trading matchups for ServiceNow
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ServiceNow and Dow Jones
The main advantage of trading using opposite ServiceNow and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| ServiceNow vs. RCM TECHNOLOGIES | ServiceNow vs. Marie Brizard Wine | ServiceNow vs. ACCSYS TECHPLC EO | ServiceNow vs. SOFI TECHNOLOGIES |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |