Correlation Between GMS and ServiceNow
Can any of the company-specific risk be diversified away by investing in both GMS 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 GMS and ServiceNow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and ServiceNow, you can compare the effects of market volatilities on GMS 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 GMS with a short position of ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and ServiceNow.
Diversification Opportunities for GMS and ServiceNow
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GMS and ServiceNow is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and GMS 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 GMS Inc 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 GMS i.e., GMS and ServiceNow go up and down completely randomly.
Pair Corralation between GMS and ServiceNow
Considering the 90-day investment horizon GMS is expected to generate 1.18 times less return on investment than ServiceNow. But when comparing it to its historical volatility, GMS Inc is 1.14 times less risky than ServiceNow. It trades about 0.09 of its potential returns per unit of risk. ServiceNow is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 68,768 in ServiceNow on September 2, 2024 and sell it today you would earn a total of 36,176 from holding ServiceNow or generate 52.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. ServiceNow
Performance |
| Timeline |
| GMS Inc |
| ServiceNow |
GMS and ServiceNow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and ServiceNow
The main advantage of trading using opposite GMS and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS 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.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| ServiceNow vs. Datadog | ServiceNow vs. Gitlab Inc | ServiceNow vs. Atlassian Corp Plc | ServiceNow vs. HubSpot |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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