Correlation Between Cognizant Technology and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Verizon Communications 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 Verizon Communications 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 Verizon Communications, you can compare the effects of market volatilities on Cognizant Technology and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Verizon Communications.
Diversification Opportunities for Cognizant Technology and Verizon Communications
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cognizant and Verizon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Verizon Communications go up and down completely randomly.
Pair Corralation between Cognizant Technology and Verizon Communications
Assuming the 90 days trading horizon Cognizant Technology is expected to generate 1.93 times less return on investment than Verizon Communications. But when comparing it to its historical volatility, Cognizant Technology Solutions is 1.31 times less risky than Verizon Communications. It trades about 0.07 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,202 in Verizon Communications on August 27, 2024 and sell it today you would earn a total of 981.00 from holding Verizon Communications or generate 30.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 78.42% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Verizon Communications
Performance |
| Timeline |
| Cognizant Technology |
| Verizon Communications |
Cognizant Technology and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Verizon Communications
The main advantage of trading using opposite Cognizant Technology and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Cognizant Technology vs. Charter Communications | Cognizant Technology vs. New Oriental Education | Cognizant Technology vs. TAL Education Group | Cognizant Technology vs. United Airlines Holdings |
| Verizon Communications vs. CVS Health | Verizon Communications vs. Planet Fitness | Verizon Communications vs. Bemobi Mobile Tech | Verizon Communications vs. Align Technology |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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