Correlation Between ServiceNow and SCOTTS

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Can any of the company-specific risk be diversified away by investing in both ServiceNow and SCOTTS 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 SCOTTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and SCOTTS MIRACLE GRO 45, you can compare the effects of market volatilities on ServiceNow and SCOTTS 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 SCOTTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and SCOTTS.

Diversification Opportunities for ServiceNow and SCOTTS

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between ServiceNow and SCOTTS is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and SCOTTS MIRACLE GRO 45 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTTS MIRACLE GRO 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 SCOTTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTTS MIRACLE GRO has no effect on the direction of ServiceNow i.e., ServiceNow and SCOTTS go up and down completely randomly.

Pair Corralation between ServiceNow and SCOTTS

Considering the 90-day investment horizon ServiceNow is expected to under-perform the SCOTTS. In addition to that, ServiceNow is 3.12 times more volatile than SCOTTS MIRACLE GRO 45. It trades about -0.13 of its total potential returns per unit of risk. SCOTTS MIRACLE GRO 45 is currently generating about -0.04 per unit of volatility. If you would invest  9,169  in SCOTTS MIRACLE GRO 45 on November 30, 2024 and sell it today you would lose (119.00) from holding SCOTTS MIRACLE GRO 45 or give up 1.3% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy97.62%
ValuesDaily Returns

ServiceNow  vs.  SCOTTS MIRACLE GRO 45

 Performance 
       Timeline  
ServiceNow 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ServiceNow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
SCOTTS MIRACLE GRO 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days SCOTTS MIRACLE GRO 45 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SCOTTS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ServiceNow and SCOTTS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ServiceNow and SCOTTS

The main advantage of trading using opposite ServiceNow and SCOTTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, SCOTTS 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 SCOTTS will offset losses from the drop in SCOTTS's long position.
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The idea behind ServiceNow and SCOTTS MIRACLE GRO 45 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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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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