Correlation Between Salesforce and ServiceNow

Can any of the company-specific risk be diversified away by investing in both Salesforce 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 Salesforce and ServiceNow into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Salesforce and ServiceNow, you can compare the effects of market volatilities on Salesforce 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 Salesforce with a short position of ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and ServiceNow.

Diversification Opportunities for Salesforce and ServiceNow

0.91

Correlation Coefficient

Salesforce  ServiceNow

Almost no diversification

The 3 months correlation between Salesforce and ServiceNow is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Salesforce 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 Salesforce 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 Salesforce i.e., Salesforce and ServiceNow go up and down completely randomly.

Pair Corralation between Salesforce and ServiceNow

Considering the 90-day investment horizon Salesforce is expected to under-perform the ServiceNow. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.28 times less risky than ServiceNow. The stock trades about -0.02 of its potential returns per unit of risk. The ServiceNow is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  95,459  in ServiceNow on February 1, 2025 and sell it today you would earn a total of  42.00  from holding ServiceNow or generate 0.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Salesforce  vs.  ServiceNow

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ServiceNow

Risk-Adjusted Performance

Very Weak

Over the last 90 days ServiceNow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ServiceNow is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Salesforce and ServiceNow

The main advantage of trading using opposite Salesforce and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce 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 Salesforce 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.