Correlation Between Cognizant Technology and Capgemini
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Capgemini 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 Cognizant Technology and Capgemini into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cognizant Technology Solutions and Capgemini SE, you can compare the effects of market volatilities on Cognizant Technology and Capgemini 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 Cognizant Technology with a short position of Capgemini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Capgemini.
Diversification Opportunities for Cognizant Technology and Capgemini
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cognizant and Capgemini is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE and Cognizant Technology 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 Cognizant Technology Solutions are associated (or correlated) with Capgemini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capgemini SE has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Capgemini go up and down completely randomly.
Pair Corralation between Cognizant Technology and Capgemini
Assuming the 90 days horizon Cognizant Technology Solutions is expected to generate 0.88 times more return on investment than Capgemini. However, Cognizant Technology Solutions is 1.14 times less risky than Capgemini. It trades about 0.05 of its potential returns per unit of risk. Capgemini SE is currently generating about 0.01 per unit of risk. If you would invest 6,040 in Cognizant Technology Solutions on November 5, 2024 and sell it today you would earn a total of 1,941 from holding Cognizant Technology Solutions or generate 32.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Capgemini SE
Performance |
| Timeline |
| Cognizant Technology |
| Capgemini SE |
Cognizant Technology and Capgemini Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Capgemini
The main advantage of trading using opposite Cognizant Technology and Capgemini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Capgemini 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 Capgemini will offset losses from the drop in Capgemini's long position.| Cognizant Technology vs. Tradeweb Markets | Cognizant Technology vs. Darden Restaurants | Cognizant Technology vs. Tradegate AG Wertpapierhandelsbank | Cognizant Technology vs. BJs Restaurants |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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