Correlation Between Cognizant Technology and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Spotify Technology 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 Spotify Technology 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 Spotify Technology SA, you can compare the effects of market volatilities on Cognizant Technology and Spotify Technology 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 Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Spotify Technology.
Diversification Opportunities for Cognizant Technology and Spotify Technology
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cognizant and Spotify is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology 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 Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Spotify Technology go up and down completely randomly.
Pair Corralation between Cognizant Technology and Spotify Technology
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 27.48 times less return on investment than Spotify Technology. But when comparing it to its historical volatility, Cognizant Technology Solutions is 19.9 times less risky than Spotify Technology. It trades about 0.27 of its potential returns per unit of risk. Spotify Technology SA is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 54,864 in Spotify Technology SA on August 27, 2024 and sell it today you would earn a total of 14,087 from holding Spotify Technology SA or generate 25.68% 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. Spotify Technology SA
Performance |
| Timeline |
| Cognizant Technology |
| Spotify Technology |
Cognizant Technology and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Spotify Technology
The main advantage of trading using opposite Cognizant Technology and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Spotify Technology 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 Spotify Technology will offset losses from the drop in Spotify Technology's long position.| Cognizant Technology vs. Fras le SA | Cognizant Technology vs. Clave Indices De | Cognizant Technology vs. BTG Pactual Logstica | Cognizant Technology vs. Telefonaktiebolaget LM Ericsson |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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