Correlation Between ServiceNow and SAP SE
Can any of the company-specific risk be diversified away by investing in both ServiceNow and SAP SE 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 SAP SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and SAP SE, you can compare the effects of market volatilities on ServiceNow and SAP SE 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 SAP SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and SAP SE.
Diversification Opportunities for ServiceNow and SAP SE
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ServiceNow and SAP is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 SAP SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of ServiceNow i.e., ServiceNow and SAP SE go up and down completely randomly.
Pair Corralation between ServiceNow and SAP SE
Considering the 90-day investment horizon ServiceNow is expected to generate 1.23 times more return on investment than SAP SE. However, ServiceNow is 1.23 times more volatile than SAP SE. It trades about 0.11 of its potential returns per unit of risk. SAP SE is currently generating about 0.1 per unit of risk. If you would invest 39,226 in ServiceNow on August 24, 2024 and sell it today you would earn a total of 66,080 from holding ServiceNow or generate 168.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.4% |
| Values | Daily Returns |
ServiceNow vs. SAP SE
Performance |
| Timeline |
| ServiceNow |
| SAP SE |
ServiceNow and SAP SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ServiceNow and SAP SE
The main advantage of trading using opposite ServiceNow and SAP SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, SAP SE 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 SAP SE will offset losses from the drop in SAP SE's long position.| ServiceNow vs. Alkami Technology | ServiceNow vs. Paycor HCM | ServiceNow vs. Procore Technologies | ServiceNow vs. Enfusion |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |