Correlation Between Cognizant Technology and MGM Resorts
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and MGM Resorts 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 MGM Resorts 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 MGM Resorts International, you can compare the effects of market volatilities on Cognizant Technology and MGM Resorts 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 MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and MGM Resorts.
Diversification Opportunities for Cognizant Technology and MGM Resorts
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cognizant and MGM is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and MGM Resorts International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM Resorts International 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 MGM Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM Resorts International has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and MGM Resorts go up and down completely randomly.
Pair Corralation between Cognizant Technology and MGM Resorts
Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to generate 0.49 times more return on investment than MGM Resorts. However, Cognizant Technology Solutions is 2.03 times less risky than MGM Resorts. It trades about 0.05 of its potential returns per unit of risk. MGM Resorts International is currently generating about 0.02 per unit of risk. If you would invest 112,595 in Cognizant Technology Solutions on September 2, 2024 and sell it today you would earn a total of 27,405 from holding Cognizant Technology Solutions or generate 24.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. MGM Resorts International
Performance |
| Timeline |
| Cognizant Technology |
| MGM Resorts International |
Cognizant Technology and MGM Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and MGM Resorts
The main advantage of trading using opposite Cognizant Technology and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, MGM Resorts 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 MGM Resorts will offset losses from the drop in MGM Resorts' 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 |
| MGM Resorts vs. Applied Materials | MGM Resorts vs. CVS Health | MGM Resorts vs. McEwen Mining | MGM Resorts vs. Cognizant Technology Solutions |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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