Correlation Between Cognizant Technology and Delta Air
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Delta Air 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 Delta Air 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 Delta Air Lines, you can compare the effects of market volatilities on Cognizant Technology and Delta Air 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 Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Delta Air.
Diversification Opportunities for Cognizant Technology and Delta Air
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cognizant and Delta is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines 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 Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Delta Air go up and down completely randomly.
Pair Corralation between Cognizant Technology and Delta Air
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 29.14 times less return on investment than Delta Air. But when comparing it to its historical volatility, Cognizant Technology Solutions is 26.64 times less risky than Delta Air. It trades about 0.22 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 115,089 in Delta Air Lines on August 30, 2024 and sell it today you would earn a total of 15,411 from holding Delta Air Lines or generate 13.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Delta Air Lines
Performance |
| Timeline |
| Cognizant Technology |
| Delta Air Lines |
Cognizant Technology and Delta Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Delta Air
The main advantage of trading using opposite Cognizant Technology and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Delta Air 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 Delta Air will offset losses from the drop in Delta Air's long position.| Cognizant Technology vs. First Republic Bank | Cognizant Technology vs. The Bank of | Cognizant Technology vs. GMxico Transportes SAB | Cognizant Technology vs. DXC Technology |
| Delta Air vs. Southern Copper | Delta Air vs. McEwen Mining | Delta Air vs. Ameriprise Financial | Delta Air vs. Grupo Carso SAB |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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