Correlation Between Cognizant Technology and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Basic Materials 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 Basic Materials 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 Basic Materials, you can compare the effects of market volatilities on Cognizant Technology and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Basic Materials.
Diversification Opportunities for Cognizant Technology and Basic Materials
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cognizant and Basic is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Basic Materials go up and down completely randomly.
Pair Corralation between Cognizant Technology and Basic Materials
Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to generate 1.1 times more return on investment than Basic Materials. However, Cognizant Technology is 1.1 times more volatile than Basic Materials. It trades about 0.06 of its potential returns per unit of risk. Basic Materials is currently generating about 0.0 per unit of risk. If you would invest 34,864 in Cognizant Technology Solutions on November 5, 2024 and sell it today you would earn a total of 8,469 from holding Cognizant Technology Solutions or generate 24.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 65.85% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Basic Materials
Performance |
| Timeline |
Cognizant Technology and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Cognizant Technology Solutions
Pair trading matchups for Cognizant Technology
Basic Materials
Pair trading matchups for Basic Materials
Pair Trading with Cognizant Technology and Basic Materials
The main advantage of trading using opposite Cognizant Technology and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| Cognizant Technology vs. UnitedHealth Group Incorporated | Cognizant Technology vs. Metalrgica Riosulense SA | Cognizant Technology vs. Beyond Meat | Cognizant Technology vs. Academy Sports and |
| Basic Materials vs. Zoom Video Communications | Basic Materials vs. Globus Medical, | Basic Materials vs. Tres Tentos Agroindustrial | Basic Materials vs. New Oriental Education |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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