Correlation Between Cognizant Technology and Steel Dynamics
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics, you can compare the effects of market volatilities on Cognizant Technology and Steel Dynamics 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 Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Steel Dynamics.
Diversification Opportunities for Cognizant Technology and Steel Dynamics
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cognizant and Steel is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics 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 Steel Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Dynamics has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Steel Dynamics go up and down completely randomly.
Pair Corralation between Cognizant Technology and Steel Dynamics
If you would invest 139,394 in Cognizant Technology Solutions on September 13, 2024 and sell it today you would earn a total of 606.00 from holding Cognizant Technology Solutions or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Steel Dynamics
Performance |
| Timeline |
| Cognizant Technology |
| Steel Dynamics |
Cognizant Technology and Steel Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Steel Dynamics
The main advantage of trading using opposite Cognizant Technology and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Steel Dynamics 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 Steel Dynamics will offset losses from the drop in Steel Dynamics' long position.| Cognizant Technology vs. Martin Marietta Materials | Cognizant Technology vs. Micron Technology | Cognizant Technology vs. Monster Beverage Corp | Cognizant Technology vs. FibraHotel |
| Steel Dynamics vs. FIBRA Storage | Steel Dynamics vs. Cognizant Technology Solutions | Steel Dynamics vs. Southern Copper | Steel Dynamics vs. Hoteles City Express |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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