Correlation Between AMADEUS IT and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both AMADEUS IT 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 AMADEUS IT and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMADEUS IT GRP and Cognizant Technology Solutions, you can compare the effects of market volatilities on AMADEUS IT 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 AMADEUS IT with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMADEUS IT and Cognizant Technology.
Diversification Opportunities for AMADEUS IT and Cognizant Technology
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AMADEUS and Cognizant is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding AMADEUS IT GRP and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and AMADEUS IT 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 AMADEUS IT GRP 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 AMADEUS IT i.e., AMADEUS IT and Cognizant Technology go up and down completely randomly.
Pair Corralation between AMADEUS IT and Cognizant Technology
Assuming the 90 days trading horizon AMADEUS IT is expected to generate 3.1 times less return on investment than Cognizant Technology. But when comparing it to its historical volatility, AMADEUS IT GRP is 1.14 times less risky than Cognizant Technology. It trades about 0.04 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,323 in Cognizant Technology Solutions on September 23, 2024 and sell it today you would earn a total of 1,275 from holding Cognizant Technology Solutions or generate 20.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AMADEUS IT GRP vs. Cognizant Technology Solutions
Performance |
| Timeline |
| AMADEUS IT GRP |
| Cognizant Technology |
AMADEUS IT and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AMADEUS IT and Cognizant Technology
The main advantage of trading using opposite AMADEUS IT and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMADEUS IT 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.| AMADEUS IT vs. Accenture plc | AMADEUS IT vs. International Business Machines | AMADEUS IT vs. Infosys Limited | AMADEUS IT vs. Cognizant Technology Solutions |
| Cognizant Technology vs. Accenture plc | Cognizant Technology vs. International Business Machines | Cognizant Technology vs. Infosys Limited | Cognizant Technology vs. AMADEUS IT GRP |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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