Correlation Between Cognizant Technology and EBay
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and EBay 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 EBay 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 eBay Inc, you can compare the effects of market volatilities on Cognizant Technology and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and EBay.
Diversification Opportunities for Cognizant Technology and EBay
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cognizant and EBay is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and EBay go up and down completely randomly.
Pair Corralation between Cognizant Technology and EBay
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 4.0 times less return on investment than EBay. But when comparing it to its historical volatility, Cognizant Technology Solutions is 18.96 times less risky than EBay. It trades about 0.22 of its potential returns per unit of risk. eBay Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 126,299 in eBay Inc on September 12, 2024 and sell it today you would earn a total of 1,901 from holding eBay Inc or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. eBay Inc
Performance |
| Timeline |
| Cognizant Technology |
| eBay Inc |
Cognizant Technology and EBay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and EBay
The main advantage of trading using opposite Cognizant Technology and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.| Cognizant Technology vs. DXC Technology | Cognizant Technology vs. The Select Sector | Cognizant Technology vs. Promotora y Operadora | Cognizant Technology vs. iShares Global Timber |
| EBay vs. Cognizant Technology Solutions | EBay vs. Grupo Sports World | EBay vs. KB Home | EBay vs. DXC Technology |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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