Correlation Between Airtel Africa and ServiceNow
Can any of the company-specific risk be diversified away by investing in both Airtel Africa and ServiceNow 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 Airtel Africa and ServiceNow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Airtel Africa Plc and ServiceNow, you can compare the effects of market volatilities on Airtel Africa and ServiceNow 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 Airtel Africa with a short position of ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airtel Africa and ServiceNow.
Diversification Opportunities for Airtel Africa and ServiceNow
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Airtel and ServiceNow is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Airtel Africa Plc and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Airtel Africa 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 Airtel Africa Plc are associated (or correlated) with ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of Airtel Africa i.e., Airtel Africa and ServiceNow go up and down completely randomly.
Pair Corralation between Airtel Africa and ServiceNow
Assuming the 90 days horizon Airtel Africa Plc is expected to under-perform the ServiceNow. But the pink sheet apears to be less risky and, when comparing its historical volatility, Airtel Africa Plc is 1.12 times less risky than ServiceNow. The pink sheet trades about -0.08 of its potential returns per unit of risk. The ServiceNow is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 104,829 in ServiceNow on September 13, 2024 and sell it today you would earn a total of 9,889 from holding ServiceNow or generate 9.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Airtel Africa Plc vs. ServiceNow
Performance |
| Timeline |
| Airtel Africa Plc |
| ServiceNow |
Airtel Africa and ServiceNow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Airtel Africa and ServiceNow
The main advantage of trading using opposite Airtel Africa and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airtel Africa position performs unexpectedly, ServiceNow 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 ServiceNow will offset losses from the drop in ServiceNow's long position.| Airtel Africa vs. Verizon Communications | Airtel Africa vs. ATT Inc | Airtel Africa vs. Comcast Corp | Airtel Africa vs. Deutsche Telekom AG |
| ServiceNow vs. Bill Com Holdings | ServiceNow vs. Datadog | ServiceNow vs. Gitlab Inc | ServiceNow vs. Atlassian Corp Plc |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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