Correlation Between Cognizant Technology and Aurora Innovation
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Aurora Innovation 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 Aurora Innovation 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 Aurora Innovation, you can compare the effects of market volatilities on Cognizant Technology and Aurora Innovation 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 Aurora Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Aurora Innovation.
Diversification Opportunities for Cognizant Technology and Aurora Innovation
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cognizant and Aurora is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Aurora Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Innovation 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 Aurora Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Innovation has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Aurora Innovation go up and down completely randomly.
Pair Corralation between Cognizant Technology and Aurora Innovation
Given the investment horizon of 90 days Cognizant Technology is expected to generate 5.87 times less return on investment than Aurora Innovation. But when comparing it to its historical volatility, Cognizant Technology Solutions is 7.67 times less risky than Aurora Innovation. It trades about 0.3 of its potential returns per unit of risk. Aurora Innovation is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 615.00 in Aurora Innovation on September 19, 2024 and sell it today you would earn a total of 191.00 from holding Aurora Innovation or generate 31.06% 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. Aurora Innovation
Performance |
| Timeline |
| Cognizant Technology |
| Aurora Innovation |
Cognizant Technology and Aurora Innovation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Aurora Innovation
The main advantage of trading using opposite Cognizant Technology and Aurora Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Aurora Innovation 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 Aurora Innovation will offset losses from the drop in Aurora Innovation's long position.| Cognizant Technology vs. Wipro Limited ADR | Cognizant Technology vs. Accenture plc | Cognizant Technology vs. Gartner | Cognizant Technology vs. CACI International |
| Aurora Innovation vs. FiscalNote Holdings | Aurora Innovation vs. Innodata | Aurora Innovation vs. International Business Machines | Aurora Innovation vs. BigBearai Holdings |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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