Correlation Between Cognizant Technology and Schlumberger
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Schlumberger 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 Schlumberger 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 Schlumberger Limited, you can compare the effects of market volatilities on Cognizant Technology and Schlumberger 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 Schlumberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Schlumberger.
Diversification Opportunities for Cognizant Technology and Schlumberger
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cognizant and Schlumberger is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited 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 Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger Limited has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Schlumberger go up and down completely randomly.
Pair Corralation between Cognizant Technology and Schlumberger
Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to generate about the same return on investment as Schlumberger Limited. But, Cognizant Technology Solutions is 2.21 times less risky than Schlumberger. It trades about 0.16 of its potential returns per unit of risk. Schlumberger Limited is currently generating about 0.07 per unit of risk. If you would invest 76,619 in Schlumberger Limited on September 2, 2024 and sell it today you would earn a total of 13,734 from holding Schlumberger Limited or generate 17.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Schlumberger Limited
Performance |
| Timeline |
| Cognizant Technology |
| Schlumberger Limited |
Cognizant Technology and Schlumberger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Schlumberger
The main advantage of trading using opposite Cognizant Technology and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Schlumberger 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 Schlumberger will offset losses from the drop in Schlumberger'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 |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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