Correlation Between Check Point and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Check Point 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 Check Point and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Check Point Software and Cognizant Technology Solutions, you can compare the effects of market volatilities on Check Point 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 Check Point with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and Cognizant Technology.
Diversification Opportunities for Check Point and Cognizant Technology
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Check and Cognizant is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Check Point 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 Check Point Software 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 Check Point i.e., Check Point and Cognizant Technology go up and down completely randomly.
Pair Corralation between Check Point and Cognizant Technology
Assuming the 90 days trading horizon Check Point Software is expected to generate 1.47 times more return on investment than Cognizant Technology. However, Check Point is 1.47 times more volatile than Cognizant Technology Solutions. It trades about 0.47 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.3 per unit of risk. If you would invest 17,360 in Check Point Software on November 7, 2024 and sell it today you would earn a total of 3,500 from holding Check Point Software or generate 20.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Check Point Software vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Check Point Software |
| Cognizant Technology |
Check Point and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and Cognizant Technology
The main advantage of trading using opposite Check Point and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point 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.| Check Point vs. InPlay Oil Corp | Check Point vs. MAVEN WIRELESS SWEDEN | Check Point vs. ARISTOCRAT LEISURE | Check Point vs. FLOW TRADERS LTD |
| Cognizant Technology vs. Nomad Foods | Cognizant Technology vs. Tyson Foods | Cognizant Technology vs. Siemens Healthineers AG | Cognizant Technology vs. Waste Management |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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