Correlation Between Exxon and Servicenow

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

Diversification Opportunities for Exxon and Servicenow

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Exxon and Servicenow is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Servicenow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servicenow and Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and Servicenow go up and down completely randomly.

Pair Corralation between Exxon and Servicenow

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.76 times more return on investment than Servicenow. However, Exxon Mobil Corp is 1.32 times less risky than Servicenow. It trades about 0.14 of its potential returns per unit of risk. Servicenow is currently generating about 0.08 per unit of risk. If you would invest  8,838  in Exxon Mobil Corp on May 21, 2022 and sell it today you would earn a total of  570.00  from holding Exxon Mobil Corp or generate 6.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Servicenow

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Exxon is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Exxon Price Channel

Servicenow 
Servicenow Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Servicenow are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Servicenow showed solid returns over the last few months and may actually be approaching a breakup point.

Servicenow Price Channel

Exxon and Servicenow Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Servicenow

The main advantage of trading using opposite Exxon and Servicenow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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