Correlation Between FARO Technologies and ServiceNow

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

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

Diversification Opportunities for FARO Technologies and ServiceNow

0.06

Correlation Coefficient

FARO Technologies  ServiceNow

Significant diversification

The 3 months correlation between FARO and ServiceNow is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and FARO Technologies 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 FARO Technologies 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 FARO Technologies i.e., FARO Technologies and ServiceNow go up and down completely randomly.

Pair Corralation between FARO Technologies and ServiceNow

Given the investment horizon of 90 days FARO Technologies is expected to generate 0.29 times more return on investment than ServiceNow. However, FARO Technologies is 3.45 times less risky than ServiceNow. It trades about 0.16 of its potential returns per unit of risk. ServiceNow is currently generating about -0.04 per unit of risk. If you would invest  4,236  in FARO Technologies on May 6, 2025 and sell it today you would earn a total of  163.00  from holding FARO Technologies or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	82.54%
Values	Daily Returns

FARO Technologies  vs.  ServiceNow

FARO Technologies

Risk-Adjusted Performance

Good

Over the last 90 days FARO Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FARO Technologies is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the 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 FARO Technologies and ServiceNow

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

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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 Stocks Directory module to find actively traded stocks across global markets.