Correlation Between Big 5 and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Cognizant Technology Solutions, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Cognizant Technology.
Diversification Opportunities for Big 5 and Cognizant Technology
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Big and Cognizant is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and Cognizant Technology go up and down completely randomly.
Pair Corralation between Big 5 and Cognizant Technology
Assuming the 90 days horizon Big 5 Sporting is expected to generate 2.14 times more return on investment than Cognizant Technology. However, Big 5 is 2.14 times more volatile than Cognizant Technology Solutions. It trades about 0.02 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about -0.02 per unit of risk. If you would invest 156.00 in Big 5 Sporting on September 13, 2024 and sell it today you would earn a total of 1.00 from holding Big 5 Sporting or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Big 5 Sporting |
| Cognizant Technology |
Big 5 and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Cognizant Technology
The main advantage of trading using opposite Big 5 and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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.| Big 5 vs. Superior Plus Corp | Big 5 vs. SIVERS SEMICONDUCTORS AB | Big 5 vs. NorAm Drilling AS | Big 5 vs. Norsk Hydro ASA |
| Cognizant Technology vs. Superior Plus Corp | Cognizant Technology vs. SIVERS SEMICONDUCTORS AB | Cognizant Technology vs. Norsk Hydro ASA | Cognizant Technology vs. Reliance Steel Aluminum |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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