Correlation Between ServiceNow and Shopify
Can any of the company-specific risk be diversified away by investing in both ServiceNow and Shopify 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 Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and Shopify, you can compare the effects of market volatilities on ServiceNow and Shopify 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 Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and Shopify.
Diversification Opportunities for ServiceNow and Shopify
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ServiceNow and Shopify is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of ServiceNow i.e., ServiceNow and Shopify go up and down completely randomly.
Pair Corralation between ServiceNow and Shopify
Considering the 90-day investment horizon ServiceNow is expected to generate 0.63 times more return on investment than Shopify. However, ServiceNow is 1.58 times less risky than Shopify. It trades about 0.1 of its potential returns per unit of risk. Shopify is currently generating about 0.06 per unit of risk. If you would invest 57,851 in ServiceNow on August 11, 2024 and sell it today you would earn a total of 42,957 from holding ServiceNow or generate 74.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
ServiceNow vs. Shopify
Performance |
Timeline |
ServiceNow |
Shopify |
ServiceNow and Shopify Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ServiceNow and Shopify
The main advantage of trading using opposite ServiceNow and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, Shopify 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 Shopify will offset losses from the drop in Shopify's long position.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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