Correlation Between Cognizant Technology and Novartis
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Novartis 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 Novartis 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 Novartis AG, you can compare the effects of market volatilities on Cognizant Technology and Novartis 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 Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Novartis.
Diversification Opportunities for Cognizant Technology and Novartis
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cognizant and Novartis is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG 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 Novartis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novartis AG has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Novartis go up and down completely randomly.
Pair Corralation between Cognizant Technology and Novartis
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 1.17 times less return on investment than Novartis. But when comparing it to its historical volatility, Cognizant Technology Solutions is 1.51 times less risky than Novartis. It trades about 0.05 of its potential returns per unit of risk. Novartis AG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 156,100 in Novartis AG on September 25, 2024 and sell it today you would earn a total of 39,900 from holding Novartis AG or generate 25.56% 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. Novartis AG
Performance |
| Timeline |
| Cognizant Technology |
| Novartis AG |
Cognizant Technology and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Novartis
The main advantage of trading using opposite Cognizant Technology and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Novartis 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 Novartis will offset losses from the drop in Novartis' long position.| Cognizant Technology vs. Grupo Sports World | Cognizant Technology vs. Lloyds Banking Group | Cognizant Technology vs. Micron Technology | Cognizant Technology vs. United Airlines Holdings |
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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