Correlation Between Cognizant Technology and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Cognizant Technology and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Dow Jones.
Diversification Opportunities for Cognizant Technology and Dow Jones
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cognizant and Dow is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Dow Jones go up and down completely randomly.
Pair Corralation between Cognizant Technology and Dow Jones
Given the investment horizon of 90 days Cognizant Technology Solutions is expected to generate 1.97 times more return on investment than Dow Jones. However, Cognizant Technology is 1.97 times more volatile than Dow Jones Industrial. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.09 per unit of risk. If you would invest 5,779 in Cognizant Technology Solutions on August 28, 2024 and sell it today you would earn a total of 2,284 from holding Cognizant Technology Solutions or generate 39.52% 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. Dow Jones Industrial
Performance |
| Timeline |
Cognizant Technology and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Cognizant Technology Solutions
Pair trading matchups for Cognizant Technology
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Cognizant Technology and Dow Jones
The main advantage of trading using opposite Cognizant Technology and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Cognizant Technology vs. Wipro Limited ADR | Cognizant Technology vs. Accenture plc | Cognizant Technology vs. Gartner | Cognizant Technology vs. CACI International |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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