Correlation Between Applied Materials and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Cognizant Technology 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 Applied Materials and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Cognizant Technology Solutions, you can compare the effects of market volatilities on Applied Materials and Cognizant Technology 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 Applied Materials with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Cognizant Technology.
Diversification Opportunities for Applied Materials and Cognizant Technology
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and Cognizant is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Applied Materials 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 Applied Materials are associated (or correlated) with Cognizant Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognizant Technology has no effect on the direction of Applied Materials i.e., Applied Materials and Cognizant Technology go up and down completely randomly.
Pair Corralation between Applied Materials and Cognizant Technology
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.7 times more return on investment than Cognizant Technology. However, Applied Materials is 1.7 times more volatile than Cognizant Technology Solutions. It trades about 0.05 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.04 per unit of risk. If you would invest 10,911 in Applied Materials on September 3, 2024 and sell it today you would earn a total of 6,739 from holding Applied Materials or generate 61.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Applied Materials vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Applied Materials |
| Cognizant Technology |
Applied Materials and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Cognizant Technology
The main advantage of trading using opposite Applied Materials and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Cognizant Technology 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 Cognizant Technology will offset losses from the drop in Cognizant Technology's long position.| Applied Materials vs. SMA Solar Technology | Applied Materials vs. Arcticzymes Technologies ASA | Applied Materials vs. DXC Technology Co | Applied Materials vs. Waste Management |
| Cognizant Technology vs. SBM Offshore NV | Cognizant Technology vs. Taylor Maritime Investments | Cognizant Technology vs. New Residential Investment | Cognizant Technology vs. Spirent Communications 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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