Correlation Between Cognizant Technology and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Alibaba 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 Alibaba 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 Alibaba Group Holding, you can compare the effects of market volatilities on Cognizant Technology and Alibaba 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 Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Alibaba Group.
Diversification Opportunities for Cognizant Technology and Alibaba Group
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cognizant and Alibaba is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Alibaba Group go up and down completely randomly.
Pair Corralation between Cognizant Technology and Alibaba Group
Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to generate 0.54 times more return on investment than Alibaba Group. However, Cognizant Technology Solutions is 1.84 times less risky than Alibaba Group. It trades about 0.13 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.04 per unit of risk. If you would invest 31,959 in Cognizant Technology Solutions on October 16, 2024 and sell it today you would earn a total of 11,374 from holding Cognizant Technology Solutions or generate 35.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 63.31% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Alibaba Group Holding
Performance |
| Timeline |
| Cognizant Technology |
| Alibaba Group Holding |
Cognizant Technology and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Alibaba Group
The main advantage of trading using opposite Cognizant Technology and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Alibaba 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.| Cognizant Technology vs. PENN Entertainment, | Cognizant Technology vs. Guidewire Software, | Cognizant Technology vs. Spotify Technology SA | Cognizant Technology vs. Unity Software |
| Alibaba Group vs. Take Two Interactive Software | Alibaba Group vs. Bio Techne | Alibaba Group vs. Omega Healthcare Investors, | Alibaba Group vs. Teladoc Health |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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