Correlation Between Cognizant Technology and Amazon
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Amazon 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 Amazon 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 Amazon Inc, you can compare the effects of market volatilities on Cognizant Technology and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Amazon.
Diversification Opportunities for Cognizant Technology and Amazon
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cognizant and Amazon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Amazon go up and down completely randomly.
Pair Corralation between Cognizant Technology and Amazon
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 18.44 times less return on investment than Amazon. But when comparing it to its historical volatility, Cognizant Technology Solutions is 20.42 times less risky than Amazon. It trades about 0.22 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 428,745 in Amazon Inc on September 13, 2024 and sell it today you would earn a total of 33,993 from holding Amazon Inc or generate 7.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Amazon Inc
Performance |
| Timeline |
| Cognizant Technology |
| Amazon Inc |
Cognizant Technology and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Amazon
The main advantage of trading using opposite Cognizant Technology and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Cognizant Technology vs. Martin Marietta Materials | Cognizant Technology vs. Micron Technology | Cognizant Technology vs. Monster Beverage Corp | Cognizant Technology vs. FibraHotel |
| Amazon vs. Capital One Financial | Amazon vs. First Majestic Silver | Amazon vs. CVS Health | Amazon vs. Taiwan Semiconductor Manufacturing |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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