Correlation Between ServiceNow and BorgWarner
Can any of the company-specific risk be diversified away by investing in both ServiceNow and BorgWarner 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 BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and BorgWarner, you can compare the effects of market volatilities on ServiceNow and BorgWarner 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 BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and BorgWarner.
Diversification Opportunities for ServiceNow and BorgWarner
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ServiceNow and BorgWarner is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner 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 BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of ServiceNow i.e., ServiceNow and BorgWarner go up and down completely randomly.
Pair Corralation between ServiceNow and BorgWarner
Considering the 90-day investment horizon ServiceNow is expected to generate 1.01 times more return on investment than BorgWarner. However, ServiceNow is 1.01 times more volatile than BorgWarner. It trades about 0.1 of its potential returns per unit of risk. BorgWarner is currently generating about -0.02 per unit of risk. If you would invest 56,576 in ServiceNow on August 28, 2024 and sell it today you would earn a total of 48,695 from holding ServiceNow or generate 86.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ServiceNow vs. BorgWarner
Performance |
| Timeline |
| ServiceNow |
| BorgWarner |
ServiceNow and BorgWarner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ServiceNow and BorgWarner
The main advantage of trading using opposite ServiceNow and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, BorgWarner 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 BorgWarner will offset losses from the drop in BorgWarner's long position.| ServiceNow vs. Alkami Technology | ServiceNow vs. ADEIA P | ServiceNow vs. Paycor HCM | ServiceNow vs. Envestnet |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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