Correlation Between ServiceNow and Nio
Can any of the company-specific risk be diversified away by investing in both ServiceNow and Nio 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 Nio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and Nio Class A, you can compare the effects of market volatilities on ServiceNow and Nio 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 Nio. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and Nio.
Diversification Opportunities for ServiceNow and Nio
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between ServiceNow and Nio is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of ServiceNow i.e., ServiceNow and Nio go up and down completely randomly.
Pair Corralation between ServiceNow and Nio
Considering the 90-day investment horizon ServiceNow is expected to generate 0.5 times more return on investment than Nio. However, ServiceNow is 2.01 times less risky than Nio. It trades about -0.03 of its potential returns per unit of risk. Nio Class A is currently generating about -0.26 per unit of risk. If you would invest 75,284 in ServiceNow on January 20, 2024 and sell it today you would lose (2,148) from holding ServiceNow or give up 2.85% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 97.67% |
Values | Daily Returns |
ServiceNow vs. Nio Class A
Performance |
Timeline |
ServiceNow |
Nio Class A |
ServiceNow and Nio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ServiceNow and Nio
The main advantage of trading using opposite ServiceNow and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, Nio 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 Nio will offset losses from the drop in Nio's long position.ServiceNow vs. Red Violet | ServiceNow vs. Model N | ServiceNow vs. Envestnet | ServiceNow vs. Clearwater Analytics Holdings |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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