Correlation Between Caterpillar and Servicenow

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Caterpillar 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 Caterpillar and Servicenow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Servicenow, you can compare the effects of market volatilities on Caterpillar 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 Caterpillar with a short position of Servicenow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Servicenow.

Diversification Opportunities for Caterpillar and Servicenow

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Caterpillar and Servicenow is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Servicenow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servicenow and Caterpillar 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 Caterpillar 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 Caterpillar i.e., Caterpillar and Servicenow go up and down completely randomly.

Pair Corralation between Caterpillar and Servicenow

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Servicenow. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 1.54 times less risky than Servicenow. The stock trades about -0.03 of its potential returns per unit of risk. The Servicenow is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  43,294  in Servicenow on May 12, 2022 and sell it today you would earn a total of  8,326  from holding Servicenow or generate 19.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  Servicenow

 Performance (%) 
       Timeline  
Caterpillar 
Caterpillar Performance
0 of 100
Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Caterpillar Price Channel

Servicenow 
Servicenow Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Servicenow are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Servicenow showed solid returns over the last few months and may actually be approaching a breakup point.

Servicenow Price Channel

Caterpillar and Servicenow Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and Servicenow

The main advantage of trading using opposite Caterpillar and Servicenow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar 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 Caterpillar 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.
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 CEO Directory module to screen CEOs from public companies around the world.

Other Complementary Tools

Stock Screener
Find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Go
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins
Go
ETF Directory
Find actively traded Exchange Traded Funds (ETF) from around the world
Go
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Go
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Go
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Go
Commodity Channel Index
Use Commodity Channel Index to analyze current equity momentum
Go
Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Go