Correlation Between Infosys and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Infosys 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 Infosys and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Infosys Limited and Cognizant Technology Solutions, you can compare the effects of market volatilities on Infosys 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 Infosys with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Cognizant Technology.
Diversification Opportunities for Infosys and Cognizant Technology
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Infosys and Cognizant is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Limited and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Infosys 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 Infosys Limited 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 Infosys i.e., Infosys and Cognizant Technology go up and down completely randomly.
Pair Corralation between Infosys and Cognizant Technology
Assuming the 90 days trading horizon Infosys Limited is expected to generate 33.48 times more return on investment than Cognizant Technology. However, Infosys is 33.48 times more volatile than Cognizant Technology Solutions. It trades about 0.14 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.23 per unit of risk. If you would invest 6,363 in Infosys Limited on September 4, 2024 and sell it today you would earn a total of 350.00 from holding Infosys Limited or generate 5.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Infosys Limited vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Infosys Limited |
| Cognizant Technology |
Infosys and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Infosys and Cognizant Technology
The main advantage of trading using opposite Infosys and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys 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.| Infosys vs. Zoom Video Communications | Infosys vs. STMicroelectronics NV | Infosys vs. New Oriental Education | Infosys vs. Verizon Communications |
| Cognizant Technology vs. United Rentals | Cognizant Technology vs. Marvell Technology | Cognizant Technology vs. The Home Depot | Cognizant Technology vs. Beyond Meat |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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