Correlation Between Cognizant Technology and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Sumitomo Mitsui 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 Sumitomo Mitsui 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 Sumitomo Mitsui Financial, you can compare the effects of market volatilities on Cognizant Technology and Sumitomo Mitsui 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 Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Sumitomo Mitsui.
Diversification Opportunities for Cognizant Technology and Sumitomo Mitsui
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cognizant and Sumitomo is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Cognizant Technology and Sumitomo Mitsui
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 80.47 times less return on investment than Sumitomo Mitsui. But when comparing it to its historical volatility, Cognizant Technology Solutions is 42.37 times less risky than Sumitomo Mitsui. It trades about 0.23 of its potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 7,432 in Sumitomo Mitsui Financial on September 3, 2024 and sell it today you would earn a total of 1,802 from holding Sumitomo Mitsui Financial or generate 24.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Sumitomo Mitsui Financial
Performance |
| Timeline |
| Cognizant Technology |
| Sumitomo Mitsui Financial |
Cognizant Technology and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Sumitomo Mitsui
The main advantage of trading using opposite Cognizant Technology and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Sumitomo Mitsui 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 Sumitomo Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.The idea behind Cognizant Technology Solutions and Sumitomo Mitsui Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Sumitomo Mitsui vs. Fundo Investimento Imobiliario | Sumitomo Mitsui vs. Fras le SA | Sumitomo Mitsui vs. Western Digital | Sumitomo Mitsui 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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