Correlation Between Cognizant Technology and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Eli Lilly 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 Eli Lilly 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 Eli Lilly and, you can compare the effects of market volatilities on Cognizant Technology and Eli Lilly 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 Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Eli Lilly.
Diversification Opportunities for Cognizant Technology and Eli Lilly
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cognizant and Eli is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly 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 Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Eli Lilly go up and down completely randomly.
Pair Corralation between Cognizant Technology and Eli Lilly
Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to generate 0.38 times more return on investment than Eli Lilly. However, Cognizant Technology Solutions is 2.61 times less risky than Eli Lilly. It trades about 0.16 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.04 per unit of risk. If you would invest 116,128 in Cognizant Technology Solutions on September 1, 2024 and sell it today you would earn a total of 23,872 from holding Cognizant Technology Solutions or generate 20.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Eli Lilly and
Performance |
| Timeline |
| Cognizant Technology |
| Eli Lilly |
Cognizant Technology and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Eli Lilly
The main advantage of trading using opposite Cognizant Technology and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Eli Lilly 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 Eli Lilly will offset losses from the drop in Eli Lilly's long position.| Cognizant Technology vs. The Select Sector | Cognizant Technology vs. Promotora y Operadora | Cognizant Technology vs. SPDR Series Trust | Cognizant Technology vs. iShares Trust |
| Eli Lilly vs. Roche Holding AG | Eli Lilly vs. Amgen Inc | Eli Lilly vs. Gilead Sciences | Eli Lilly vs. Biogen Inc |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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