Correlation Between Cognizant Technology and Ford
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Ford 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 Ford 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 Ford Motor, you can compare the effects of market volatilities on Cognizant Technology and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Ford.
Diversification Opportunities for Cognizant Technology and Ford
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cognizant and Ford is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Ford go up and down completely randomly.
Pair Corralation between Cognizant Technology and Ford
Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to generate 0.04 times more return on investment than Ford. However, Cognizant Technology Solutions is 25.02 times less risky than Ford. It trades about 0.22 of its potential returns per unit of risk. Ford Motor is currently generating about -0.1 per unit of risk. If you would invest 139,372 in Cognizant Technology Solutions on December 4, 2024 and sell it today you would earn a total of 628.00 from holding Cognizant Technology Solutions or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Ford Motor
Performance |
| Timeline |
| Cognizant Technology |
| Ford Motor |
Cognizant Technology and Ford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Ford
The main advantage of trading using opposite Cognizant Technology and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.| Cognizant Technology vs. Monster Beverage Corp | Cognizant Technology vs. Delta Air Lines | Cognizant Technology vs. Ross Stores | Cognizant Technology vs. Hoteles City Express |
| Ford vs. Southern Copper | Ford vs. Capital One Financial | Ford vs. GMxico Transportes SAB | Ford vs. McEwen Mining |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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