Correlation Between Cognizant Technology and URBAN OUTFITTERS
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and URBAN OUTFITTERS 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 URBAN OUTFITTERS 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 URBAN OUTFITTERS, you can compare the effects of market volatilities on Cognizant Technology and URBAN OUTFITTERS 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 URBAN OUTFITTERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and URBAN OUTFITTERS.
Diversification Opportunities for Cognizant Technology and URBAN OUTFITTERS
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cognizant and URBAN is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and URBAN OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URBAN OUTFITTERS 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 URBAN OUTFITTERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URBAN OUTFITTERS has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and URBAN OUTFITTERS go up and down completely randomly.
Pair Corralation between Cognizant Technology and URBAN OUTFITTERS
Assuming the 90 days horizon Cognizant Technology Solutions is expected to under-perform the URBAN OUTFITTERS. But the stock apears to be less risky and, when comparing its historical volatility, Cognizant Technology Solutions is 1.63 times less risky than URBAN OUTFITTERS. The stock trades about -0.07 of its potential returns per unit of risk. The URBAN OUTFITTERS is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 5,250 in URBAN OUTFITTERS on October 22, 2024 and sell it today you would lose (50.00) from holding URBAN OUTFITTERS or give up 0.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. URBAN OUTFITTERS
Performance |
| Timeline |
| Cognizant Technology |
| URBAN OUTFITTERS |
Cognizant Technology and URBAN OUTFITTERS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and URBAN OUTFITTERS
The main advantage of trading using opposite Cognizant Technology and URBAN OUTFITTERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, URBAN OUTFITTERS 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 URBAN OUTFITTERS will offset losses from the drop in URBAN OUTFITTERS's long position.| Cognizant Technology vs. Alliance Data Systems | Cognizant Technology vs. Penta Ocean Construction Co | Cognizant Technology vs. American Eagle Outfitters | Cognizant Technology vs. Dairy Farm International |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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