Correlation Between Marks and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Marks 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 Marks and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marks and Spencer and Cognizant Technology Solutions, you can compare the effects of market volatilities on Marks 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 Marks with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marks and Cognizant Technology.
Diversification Opportunities for Marks and Cognizant Technology
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Marks and Cognizant is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Marks 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 Marks and Spencer 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 Marks i.e., Marks and Cognizant Technology go up and down completely randomly.
Pair Corralation between Marks and Cognizant Technology
Assuming the 90 days trading horizon Marks and Spencer is expected to generate 1.2 times more return on investment than Cognizant Technology. However, Marks is 1.2 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 0.06 per unit of risk. If you would invest 12,499 in Marks and Spencer on September 24, 2024 and sell it today you would earn a total of 25,441 from holding Marks and Spencer or generate 203.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Marks and Spencer vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Marks and Spencer |
| Cognizant Technology |
Marks and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marks and Cognizant Technology
The main advantage of trading using opposite Marks and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marks 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.| Marks vs. Cognizant Technology Solutions | Marks vs. SMA Solar Technology | Marks vs. Auction Technology Group | Marks vs. Oxford Technology 2 |
| Cognizant Technology vs. Uniper SE | Cognizant Technology vs. Mulberry Group PLC | Cognizant Technology vs. London Security Plc | Cognizant Technology vs. Triad Group PLC |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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