Correlation Between Uber Technologies and ServiceNow

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

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

Diversification Opportunities for Uber Technologies and ServiceNow

0.09

Correlation Coefficient

Uber Technologies  ServiceNow

Significant diversification

The 3 months correlation between Uber and ServiceNow is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Uber Technologies and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Uber 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 Uber 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 Uber Technologies i.e., Uber Technologies and ServiceNow go up and down completely randomly.

Pair Corralation between Uber Technologies and ServiceNow

Given the investment horizon of 90 days Uber Technologies is expected to under-perform the ServiceNow. In addition to that, Uber Technologies is 1.07 times more volatile than ServiceNow. It trades about -0.35 of its total potential returns per unit of risk. ServiceNow is currently generating about -0.09 per unit of volatility. If you would invest  77,464  in ServiceNow on January 25, 2024 and sell it today you would lose (2,764) from holding ServiceNow or give up 3.57% of portfolio value over 90 days.

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

Uber Technologies  vs.  ServiceNow

Uber Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Uber Technologies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

ServiceNow

Risk-Adjusted Performance

0 of 100

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 Uber Technologies and ServiceNow

The main advantage of trading using opposite Uber Technologies and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uber 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 Uber 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 Commodity Directory module to find actively traded commodities issued by global exchanges.