Correlation Between Cognizant Technology and Netflix
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Netflix 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 Netflix 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 Netflix, you can compare the effects of market volatilities on Cognizant Technology and Netflix 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 Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Netflix.
Diversification Opportunities for Cognizant Technology and Netflix
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cognizant and Netflix is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Netflix go up and down completely randomly.
Pair Corralation between Cognizant Technology and Netflix
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 41.75 times less return on investment than Netflix. But when comparing it to its historical volatility, Cognizant Technology Solutions is 21.51 times less risky than Netflix. It trades about 0.22 of its potential returns per unit of risk. Netflix is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 1,514,492 in Netflix on September 1, 2024 and sell it today you would earn a total of 292,508 from holding Netflix or generate 19.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Netflix
Performance |
| Timeline |
| Cognizant Technology |
| Netflix |
Cognizant Technology and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Netflix
The main advantage of trading using opposite Cognizant Technology and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Netflix 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 Netflix will offset losses from the drop in Netflix's long position.| Cognizant Technology vs. DXC Technology | Cognizant Technology vs. The Select Sector | Cognizant Technology vs. Promotora y Operadora | Cognizant Technology vs. SPDR Series Trust |
| Netflix vs. Prudential Financial | Netflix vs. Southwest Airlines | Netflix vs. United Airlines Holdings | Netflix vs. Grupo Sports World |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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