Correlation Between Costco Wholesale and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale 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 Costco Wholesale and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Cognizant Technology Solutions, you can compare the effects of market volatilities on Costco Wholesale 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 Costco Wholesale with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Cognizant Technology.
Diversification Opportunities for Costco Wholesale and Cognizant Technology
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Costco and Cognizant is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale i.e., Costco Wholesale and Cognizant Technology go up and down completely randomly.
Pair Corralation between Costco Wholesale and Cognizant Technology
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 2.25 times more return on investment than Cognizant Technology. However, Costco Wholesale is 2.25 times more volatile than Cognizant Technology Solutions. It trades about 0.2 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.17 per unit of risk. If you would invest 1,743,189 in Costco Wholesale on August 25, 2024 and sell it today you would earn a total of 235,611 from holding Costco Wholesale or generate 13.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Costco Wholesale vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Costco Wholesale |
| Cognizant Technology |
Costco Wholesale and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Cognizant Technology
The main advantage of trading using opposite Costco Wholesale and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale 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.| Costco Wholesale vs. Applied Materials | Costco Wholesale vs. Burlington Stores | Costco Wholesale vs. Delta Air Lines | Costco Wholesale vs. Martin Marietta Materials |
| Cognizant Technology vs. KB Home | Cognizant Technology vs. Micron Technology | Cognizant Technology vs. Martin Marietta Materials | Cognizant Technology vs. Applied Materials |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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