Correlation Between Cognizant Technology and UnitedHealth Group
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and UnitedHealth Group 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 UnitedHealth Group 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 UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Cognizant Technology and UnitedHealth Group 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 UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and UnitedHealth Group.
Diversification Opportunities for Cognizant Technology and UnitedHealth Group
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cognizant and UnitedHealth is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group 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 UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and UnitedHealth Group go up and down completely randomly.
Pair Corralation between Cognizant Technology and UnitedHealth Group
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 1.04 times less return on investment than UnitedHealth Group. But when comparing it to its historical volatility, Cognizant Technology Solutions is 1.66 times less risky than UnitedHealth Group. It trades about 0.05 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,049,985 in UnitedHealth Group Incorporated on August 30, 2024 and sell it today you would earn a total of 202,890 from holding UnitedHealth Group Incorporated or generate 19.32% 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. UnitedHealth Group Incorporate
Performance |
| Timeline |
| Cognizant Technology |
| UnitedHealth Group |
Cognizant Technology and UnitedHealth Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and UnitedHealth Group
The main advantage of trading using opposite Cognizant Technology and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, UnitedHealth Group 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 UnitedHealth Group will offset losses from the drop in UnitedHealth Group's long position.| Cognizant Technology vs. First Republic Bank | Cognizant Technology vs. The Bank of | Cognizant Technology vs. GMxico Transportes SAB | Cognizant Technology vs. DXC Technology |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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