Correlation Between Cognizant Technology and Xiaomi
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Xiaomi 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 Xiaomi 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 Xiaomi, you can compare the effects of market volatilities on Cognizant Technology and Xiaomi 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 Xiaomi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Xiaomi.
Diversification Opportunities for Cognizant Technology and Xiaomi
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cognizant and Xiaomi is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi 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 Xiaomi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Xiaomi go up and down completely randomly.
Pair Corralation between Cognizant Technology and Xiaomi
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 2.37 times less return on investment than Xiaomi. But when comparing it to its historical volatility, Cognizant Technology Solutions is 34.11 times less risky than Xiaomi. It trades about 0.23 of its potential returns per unit of risk. Xiaomi is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 7,400 in Xiaomi on September 3, 2024 and sell it today you would earn a total of 0.00 from holding Xiaomi or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Xiaomi
Performance |
| Timeline |
| Cognizant Technology |
| Xiaomi |
Cognizant Technology and Xiaomi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Xiaomi
The main advantage of trading using opposite Cognizant Technology and Xiaomi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Xiaomi 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 Xiaomi will offset losses from the drop in Xiaomi's long position.| Cognizant Technology vs. Hoteles City Express | Cognizant Technology vs. FibraHotel | Cognizant Technology vs. Delta Air Lines | Cognizant Technology vs. GMxico Transportes SAB |
| Xiaomi vs. GMxico Transportes SAB | Xiaomi vs. First Majestic Silver | Xiaomi vs. UnitedHealth Group Incorporated | Xiaomi vs. Verizon Communications |
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 CEOs Directory module to screen CEOs from public companies around the world.
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