Correlation Between CDW and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both CDW 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 CDW and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDW Corporation and Cognizant Technology Solutions, you can compare the effects of market volatilities on CDW 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 CDW with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW and Cognizant Technology.
Diversification Opportunities for CDW and Cognizant Technology
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CDW and Cognizant is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp. and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and CDW 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 CDW Corporation 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 CDW i.e., CDW and Cognizant Technology go up and down completely randomly.
Pair Corralation between CDW and Cognizant Technology
Assuming the 90 days horizon CDW Corporation is expected to under-perform the Cognizant Technology. In addition to that, CDW is 1.45 times more volatile than Cognizant Technology Solutions. It trades about -0.15 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.13 per unit of volatility. If you would invest 6,951 in Cognizant Technology Solutions on September 23, 2024 and sell it today you would earn a total of 647.00 from holding Cognizant Technology Solutions or generate 9.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDW Corp. vs. Cognizant Technology Solutions
Performance |
| Timeline |
| CDW Corporation |
| Cognizant Technology |
CDW and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDW and Cognizant Technology
The main advantage of trading using opposite CDW and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDW 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.| CDW vs. Accenture plc | CDW vs. International Business Machines | CDW vs. Infosys Limited | CDW 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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