Correlation Between Cognizant Technology and Baidu
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Baidu 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 Baidu 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 Baidu Inc, you can compare the effects of market volatilities on Cognizant Technology and Baidu 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 Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Baidu.
Diversification Opportunities for Cognizant Technology and Baidu
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cognizant and Baidu is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc 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 Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Baidu go up and down completely randomly.
Pair Corralation between Cognizant Technology and Baidu
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 1.9 times less return on investment than Baidu. But when comparing it to its historical volatility, Cognizant Technology Solutions is 3.25 times less risky than Baidu. It trades about 0.08 of its potential returns per unit of risk. Baidu Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,395 in Baidu Inc on September 2, 2024 and sell it today you would earn a total of 205.00 from holding Baidu Inc or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Baidu Inc
Performance |
| Timeline |
| Cognizant Technology |
| Baidu Inc |
Cognizant Technology and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Baidu
The main advantage of trading using opposite Cognizant Technology and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Baidu 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 Baidu will offset losses from the drop in Baidu's long position.| Cognizant Technology vs. Fiserv Inc | Cognizant Technology vs. Fras le SA | Cognizant Technology vs. Energisa SA | Cognizant Technology vs. Clave Indices De |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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