Correlation Between Cognizant Technology and International Business
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on Cognizant Technology and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and International Business.
Diversification Opportunities for Cognizant Technology and International Business
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cognizant and International is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and International Business go up and down completely randomly.
Pair Corralation between Cognizant Technology and International Business
Assuming the 90 days horizon Cognizant Technology Solutions is expected to generate 1.22 times more return on investment than International Business. However, Cognizant Technology is 1.22 times more volatile than International Business Machines. It trades about 0.23 of its potential returns per unit of risk. International Business Machines is currently generating about 0.26 per unit of risk. If you would invest 6,899 in Cognizant Technology Solutions on August 29, 2024 and sell it today you would earn a total of 774.00 from holding Cognizant Technology Solutions or generate 11.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. International Business Machine
Performance |
| Timeline |
| Cognizant Technology |
| International Business |
Cognizant Technology and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and International Business
The main advantage of trading using opposite Cognizant Technology and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Cognizant Technology vs. Accenture plc | Cognizant Technology vs. International Business Machines | Cognizant Technology vs. Superior Plus Corp | Cognizant Technology vs. SIVERS SEMICONDUCTORS AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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