Correlation Between Elastic NV and ServiceNow

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

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

Diversification Opportunities for Elastic NV and ServiceNow

0.73

Correlation Coefficient

Elastic NV  ServiceNow

Poor diversification

The 3 months correlation between Elastic and ServiceNow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Elastic NV and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Elastic NV 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 Elastic NV 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 Elastic NV i.e., Elastic NV and ServiceNow go up and down completely randomly.

Pair Corralation between Elastic NV and ServiceNow

Given the investment horizon of 90 days Elastic NV is expected to generate 2.51 times less return on investment than ServiceNow. But when comparing it to its historical volatility, Elastic NV is 1.29 times less risky than ServiceNow. It trades about 0.16 of its potential returns per unit of risk. ServiceNow is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  73,550  in ServiceNow on February 4, 2025 and sell it today you would earn a total of  24,255  from holding ServiceNow or generate 32.98% return on investment over 90 days.

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

Elastic NV  vs.  ServiceNow

Elastic NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elastic NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ServiceNow

Risk-Adjusted Performance

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 Elastic NV and ServiceNow

The main advantage of trading using opposite Elastic NV and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elastic NV 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 Elastic NV 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.