Correlation Between Shopify and ServiceNow
Can any of the company-specific risk be diversified away by investing in both Shopify and ServiceNow 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 Shopify and ServiceNow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shopify and ServiceNow, you can compare the effects of market volatilities on Shopify and ServiceNow 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 Shopify with a short position of ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shopify and ServiceNow.
Diversification Opportunities for Shopify and ServiceNow
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shopify and ServiceNow is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Shopify 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 Shopify are associated (or correlated) with ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of Shopify i.e., Shopify and ServiceNow go up and down completely randomly.
Pair Corralation between Shopify and ServiceNow
Given the investment horizon of 90 days Shopify is expected to generate 2.0 times more return on investment than ServiceNow. However, Shopify is 2.0 times more volatile than ServiceNow. It trades about 0.17 of its potential returns per unit of risk. ServiceNow is currently generating about 0.22 per unit of risk. If you would invest 7,614 in Shopify on August 23, 2024 and sell it today you would earn a total of 3,034 from holding Shopify or generate 39.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shopify vs. ServiceNow
Performance |
| Timeline |
| Shopify |
| ServiceNow |
Shopify and ServiceNow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shopify and ServiceNow
The main advantage of trading using opposite Shopify and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shopify position performs unexpectedly, ServiceNow 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 ServiceNow will offset losses from the drop in ServiceNow's long position.The idea behind Shopify and ServiceNow 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.| ServiceNow vs. Autodesk | ServiceNow vs. Intuit Inc | ServiceNow vs. Zoom Video Communications | ServiceNow vs. Snowflake |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |