Correlation Between ServiceNow and INX Digital
Can any of the company-specific risk be diversified away by investing in both ServiceNow and INX Digital 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 INX Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and The INX Digital, you can compare the effects of market volatilities on ServiceNow and INX Digital 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 INX Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and INX Digital.
Diversification Opportunities for ServiceNow and INX Digital
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ServiceNow and INX is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and The INX Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INX Digital 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 INX Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INX Digital has no effect on the direction of ServiceNow i.e., ServiceNow and INX Digital go up and down completely randomly.
Pair Corralation between ServiceNow and INX Digital
Considering the 90-day investment horizon ServiceNow is expected to generate 3.12 times less return on investment than INX Digital. But when comparing it to its historical volatility, ServiceNow is 6.21 times less risky than INX Digital. It trades about 0.1 of its potential returns per unit of risk. The INX Digital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 11.00 in The INX Digital on September 3, 2024 and sell it today you would lose (5.64) from holding The INX Digital or give up 51.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ServiceNow vs. The INX Digital
Performance |
| Timeline |
| ServiceNow |
| INX Digital |
ServiceNow and INX Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ServiceNow and INX Digital
The main advantage of trading using opposite ServiceNow and INX Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, INX Digital 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 INX Digital will offset losses from the drop in INX Digital's long position.The idea behind ServiceNow and The INX Digital 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.| INX Digital vs. Salesforce | INX Digital vs. SAP SE ADR | INX Digital vs. ServiceNow | INX Digital vs. Intuit Inc |
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.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |