Correlation Between ServiceNow and Workiva

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

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

Diversification Opportunities for ServiceNow and Workiva

0.6

Correlation Coefficient

ServiceNow  Workiva

Poor diversification

The 3 months correlation between ServiceNow and Workiva is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Workiva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workiva 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 Workiva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workiva has no effect on the direction of ServiceNow i.e., ServiceNow and Workiva go up and down completely randomly.

Pair Corralation between ServiceNow and Workiva

Considering the 90-day investment horizon ServiceNow is expected to under-perform the Workiva. But the stock apears to be less risky and, when comparing its historical volatility, ServiceNow is 1.02 times less risky than Workiva. The stock trades about -0.2 of its potential returns per unit of risk. The Workiva is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,064  in Workiva on February 5, 2024 and sell it today you would earn a total of  104.00  from holding Workiva or generate 1.29% return on investment over 90 days.

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

ServiceNow  vs.  Workiva

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 latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Workiva

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workiva has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with ServiceNow and Workiva

The main advantage of trading using opposite ServiceNow and Workiva positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, Workiva 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 Workiva will offset losses from the drop in Workiva's long position.

The idea behind ServiceNow and Workiva 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.