Correlation Between Cognizant Technology and United Airlines
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and United Airlines 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 United Airlines 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 United Airlines Holdings, you can compare the effects of market volatilities on Cognizant Technology and United Airlines 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and United Airlines.
Diversification Opportunities for Cognizant Technology and United Airlines
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cognizant and United is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and United Airlines go up and down completely randomly.
Pair Corralation between Cognizant Technology and United Airlines
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 5.24 times less return on investment than United Airlines. But when comparing it to its historical volatility, Cognizant Technology Solutions is 2.53 times less risky than United Airlines. It trades about 0.04 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 90,600 in United Airlines Holdings on November 2, 2024 and sell it today you would earn a total of 132,080 from holding United Airlines Holdings or generate 145.78% 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. United Airlines Holdings
Performance |
| Timeline |
| Cognizant Technology |
| United Airlines Holdings |
Cognizant Technology and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and United Airlines
The main advantage of trading using opposite Cognizant Technology and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.| Cognizant Technology vs. Southwest Airlines | Cognizant Technology vs. Lloyds Banking Group | Cognizant Technology vs. Monster Beverage Corp | Cognizant Technology vs. United Airlines Holdings |
| United Airlines vs. Verizon Communications | United Airlines vs. Genworth Financial | United Airlines vs. The Bank of | United Airlines vs. Deutsche Bank Aktiengesellschaft |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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