Correlation Between Alphabet and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Alphabet and Cognizant 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 Alphabet and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class A and Cognizant Technology Solutions, you can compare the effects of market volatilities on Alphabet and Cognizant 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 Alphabet with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Cognizant Technology.
Diversification Opportunities for Alphabet and Cognizant Technology
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alphabet and Cognizant is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Alphabet 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 Alphabet Inc Class A are associated (or correlated) with Cognizant Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognizant Technology has no effect on the direction of Alphabet i.e., Alphabet and Cognizant Technology go up and down completely randomly.
Pair Corralation between Alphabet and Cognizant Technology
Assuming the 90 days trading horizon Alphabet Inc Class A is expected to generate 1.65 times more return on investment than Cognizant Technology. However, Alphabet is 1.65 times more volatile than Cognizant Technology Solutions. It trades about 0.08 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.05 per unit of risk. If you would invest 184,976 in Alphabet Inc Class A on August 29, 2024 and sell it today you would earn a total of 165,081 from holding Alphabet Inc Class A or generate 89.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet Inc Class A vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Alphabet Class A |
| Cognizant Technology |
Alphabet and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Cognizant Technology
The main advantage of trading using opposite Alphabet and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Cognizant 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 Cognizant Technology will offset losses from the drop in Cognizant Technology's long position.The idea behind Alphabet Inc Class A and Cognizant Technology Solutions 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.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |