Correlation Between MSCI and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both MSCI 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 MSCI and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSCI Inc and Cognizant Technology Solutions, you can compare the effects of market volatilities on MSCI 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 MSCI with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSCI and Cognizant Technology.
Diversification Opportunities for MSCI and Cognizant Technology
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MSCI and Cognizant is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and MSCI 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 MSCI Inc 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 MSCI i.e., MSCI and Cognizant Technology go up and down completely randomly.
Pair Corralation between MSCI and Cognizant Technology
Assuming the 90 days trading horizon MSCI Inc is expected to generate 21.17 times more return on investment than Cognizant Technology. However, MSCI is 21.17 times more volatile than Cognizant Technology Solutions. It trades about 0.42 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.22 per unit of risk. If you would invest 7,856 in MSCI Inc on September 12, 2024 and sell it today you would earn a total of 853.00 from holding MSCI Inc or generate 10.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
MSCI Inc vs. Cognizant Technology Solutions
Performance |
| Timeline |
| MSCI Inc |
| Cognizant Technology |
MSCI and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSCI and Cognizant Technology
The main advantage of trading using opposite MSCI and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSCI 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 MSCI Inc 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.| Cognizant Technology vs. Fidelity National Information | Cognizant Technology vs. Fundo Investimento Imobiliario | Cognizant Technology vs. LESTE FDO INV | Cognizant Technology vs. Fras le SA |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |