Correlation Between ServiceNow and Oracle

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

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

Diversification Opportunities for ServiceNow and Oracle

-0.31

Correlation Coefficient

ServiceNow  Oracle

Very good diversification

The 3 months correlation between ServiceNow and Oracle is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle 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 Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of ServiceNow i.e., ServiceNow and Oracle go up and down completely randomly.

Pair Corralation between ServiceNow and Oracle

Considering the 90-day investment horizon ServiceNow is expected to generate 3.7 times less return on investment than Oracle. But when comparing it to its historical volatility, ServiceNow is 1.11 times less risky than Oracle. It trades about 0.03 of its potential returns per unit of risk. Oracle is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13,067  in Oracle on May 6, 2025 and sell it today you would earn a total of  11,375  from holding Oracle or generate 87.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ServiceNow  vs.  Oracle

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.

Oracle

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ServiceNow and Oracle

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

The idea behind ServiceNow and Oracle 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.