Correlation Between Cognizant Technology and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Fortune Brands 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 Cognizant Technology and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cognizant Technology Solutions and Fortune Brands Home, you can compare the effects of market volatilities on Cognizant Technology and Fortune Brands 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 Cognizant Technology with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Fortune Brands.
Diversification Opportunities for Cognizant Technology and Fortune Brands
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cognizant and Fortune is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home and Cognizant Technology 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 Cognizant Technology Solutions are associated (or correlated) with Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Fortune Brands go up and down completely randomly.
Pair Corralation between Cognizant Technology and Fortune Brands
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 1.49 times less return on investment than Fortune Brands. But when comparing it to its historical volatility, Cognizant Technology Solutions is 1.43 times less risky than Fortune Brands. It trades about 0.05 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,422 in Fortune Brands Home on September 3, 2024 and sell it today you would earn a total of 2,408 from holding Fortune Brands Home or generate 44.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 76.52% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Fortune Brands Home
Performance |
| Timeline |
| Cognizant Technology |
| Fortune Brands Home |
Cognizant Technology and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Fortune Brands
The main advantage of trading using opposite Cognizant Technology and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Fortune Brands 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 Fortune Brands will offset losses from the drop in Fortune Brands' long position.| Cognizant Technology vs. SBM Offshore NV | Cognizant Technology vs. Taylor Maritime Investments | Cognizant Technology vs. New Residential Investment | Cognizant Technology vs. Spirent Communications plc |
| Fortune Brands vs. GreenX Metals | Fortune Brands vs. Gaztransport et Technigaz | Fortune Brands vs. Batm Advanced Communications | Fortune Brands vs. Future Metals NL |
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 the Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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