Correlation Between ServiceNow and ENERGY

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Can any of the company-specific risk be diversified away by investing in both ServiceNow and ENERGY 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 ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and ENERGY TRANSFER OPER, you can compare the effects of market volatilities on ServiceNow and ENERGY 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 ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and ENERGY.

Diversification Opportunities for ServiceNow and ENERGY

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between ServiceNow and ENERGY is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and ENERGY TRANSFER OPER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGY TRANSFER OPER 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 ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGY TRANSFER OPER has no effect on the direction of ServiceNow i.e., ServiceNow and ENERGY go up and down completely randomly.

Pair Corralation between ServiceNow and ENERGY

Considering the 90-day investment horizon ServiceNow is expected to generate 0.82 times more return on investment than ENERGY. However, ServiceNow is 1.21 times less risky than ENERGY. It trades about 0.32 of its potential returns per unit of risk. ENERGY TRANSFER OPER is currently generating about 0.14 per unit of risk. If you would invest  95,459  in ServiceNow on September 5, 2024 and sell it today you would earn a total of  10,273  from holding ServiceNow or generate 10.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

ServiceNow  vs.  ENERGY TRANSFER OPER

 Performance 
       Timeline  
ServiceNow 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.
ENERGY TRANSFER OPER 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in ENERGY TRANSFER OPER are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ENERGY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ServiceNow and ENERGY Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ServiceNow and ENERGY

The main advantage of trading using opposite ServiceNow and ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, ENERGY 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 ENERGY will offset losses from the drop in ENERGY's long position.
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The idea behind ServiceNow and ENERGY TRANSFER OPER 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.
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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