Correlation Between Cognizant Technology and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Volkswagen 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 Volkswagen 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 Volkswagen AG Non Vtg, you can compare the effects of market volatilities on Cognizant Technology and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Volkswagen.
Diversification Opportunities for Cognizant Technology and Volkswagen
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cognizant and Volkswagen is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Volkswagen AG Non Vtg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG Non 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG Non has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Volkswagen go up and down completely randomly.
Pair Corralation between Cognizant Technology and Volkswagen
Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to generate 0.93 times more return on investment than Volkswagen. However, Cognizant Technology Solutions is 1.08 times less risky than Volkswagen. It trades about 0.06 of its potential returns per unit of risk. Volkswagen AG Non Vtg is currently generating about -0.06 per unit of risk. If you would invest 6,089 in Cognizant Technology Solutions on August 31, 2024 and sell it today you would earn a total of 1,991 from holding Cognizant Technology Solutions or generate 32.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.94% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Volkswagen AG Non Vtg
Performance |
| Timeline |
| Cognizant Technology |
| Volkswagen AG Non |
Cognizant Technology and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Volkswagen
The main advantage of trading using opposite Cognizant Technology and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.| Cognizant Technology vs. Neometals | Cognizant Technology vs. Coor Service Management | Cognizant Technology vs. Aeorema Communications Plc | Cognizant Technology vs. JLEN Environmental Assets |
| Volkswagen vs. Playtech Plc | Volkswagen vs. Check Point Software | Volkswagen vs. TechnipFMC PLC | Volkswagen vs. Concurrent Technologies Plc |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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