Correlation Between Cognizant Technology and Southern Copper
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Southern Copper 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 Southern Copper 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 Southern Copper, you can compare the effects of market volatilities on Cognizant Technology and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Southern Copper.
Diversification Opportunities for Cognizant Technology and Southern Copper
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cognizant and Southern is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Southern Copper go up and down completely randomly.
Pair Corralation between Cognizant Technology and Southern Copper
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 2.85 times less return on investment than Southern Copper. But when comparing it to its historical volatility, Cognizant Technology Solutions is 1.82 times less risky than Southern Copper. It trades about 0.07 of its potential returns per unit of risk. Southern Copper is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 103,234 in Southern Copper on August 28, 2024 and sell it today you would earn a total of 106,956 from holding Southern Copper or generate 103.61% 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. Southern Copper
Performance |
| Timeline |
| Cognizant Technology |
| Southern Copper |
Cognizant Technology and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Southern Copper
The main advantage of trading using opposite Cognizant Technology and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper's long position.The idea behind Cognizant Technology Solutions and Southern Copper pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Southern Copper vs. The Select Sector | Southern Copper vs. Promotora y Operadora | Southern Copper vs. iShares Global Timber | Southern Copper vs. SPDR Series Trust |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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