Correlation Between Cognizant Technology and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Sunstone Hotel 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 Sunstone Hotel 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 Sunstone Hotel Investors, you can compare the effects of market volatilities on Cognizant Technology and Sunstone Hotel 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 Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Sunstone Hotel.
Diversification Opportunities for Cognizant Technology and Sunstone Hotel
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cognizant and Sunstone is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors 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 Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Sunstone Hotel go up and down completely randomly.
Pair Corralation between Cognizant Technology and Sunstone Hotel
Assuming the 90 days horizon Cognizant Technology Solutions is expected to generate 0.85 times more return on investment than Sunstone Hotel. However, Cognizant Technology Solutions is 1.18 times less risky than Sunstone Hotel. It trades about 0.05 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.03 per unit of risk. If you would invest 5,986 in Cognizant Technology Solutions on November 6, 2024 and sell it today you would earn a total of 1,995 from holding Cognizant Technology Solutions or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Sunstone Hotel Investors
Performance |
| Timeline |
| Cognizant Technology |
| Sunstone Hotel Investors |
Cognizant Technology and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Sunstone Hotel
The main advantage of trading using opposite Cognizant Technology and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Sunstone Hotel 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 Sunstone Hotel will offset losses from the drop in Sunstone Hotel's long position.| Cognizant Technology vs. FIRST SHIP LEASE | Cognizant Technology vs. Sixt Leasing SE | Cognizant Technology vs. FUYO GENERAL LEASE | Cognizant Technology vs. Global Ship Lease |
| Sunstone Hotel vs. SBM OFFSHORE | Sunstone Hotel vs. Ares Management Corp | Sunstone Hotel vs. STGEORGE MINING LTD | Sunstone Hotel vs. Cardinal Health |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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