Correlation Between CSP and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both CSP 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 CSP and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSP Inc and Cognizant Technology Solutions, you can compare the effects of market volatilities on CSP 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 CSP with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSP and Cognizant Technology.
Diversification Opportunities for CSP and Cognizant Technology
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between CSP and Cognizant is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CSP Inc and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and CSP 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 CSP Inc 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 CSP i.e., CSP and Cognizant Technology go up and down completely randomly.
Pair Corralation between CSP and Cognizant Technology
Given the investment horizon of 90 days CSP Inc is expected to generate 1.28 times more return on investment than Cognizant Technology. However, CSP is 1.28 times more volatile than Cognizant Technology Solutions. It trades about 0.24 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.1 per unit of risk. If you would invest 1,252 in CSP Inc on August 24, 2024 and sell it today you would earn a total of 167.00 from holding CSP Inc or generate 13.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSP Inc vs. Cognizant Technology Solutions
Performance |
| Timeline |
| CSP Inc |
| Cognizant Technology |
CSP and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSP and Cognizant Technology
The main advantage of trading using opposite CSP and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSP 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.The idea behind CSP Inc and Cognizant Technology Solutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Cognizant Technology vs. Wipro Limited ADR | Cognizant Technology vs. Accenture plc | Cognizant Technology vs. Gartner | Cognizant Technology vs. CACI International |
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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