Correlation Between Procter Gamble and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Procter Gamble 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 Procter Gamble and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Procter Gamble and Cognizant Technology Solutions, you can compare the effects of market volatilities on Procter Gamble 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 Procter Gamble with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Cognizant Technology.
Diversification Opportunities for Procter Gamble and Cognizant Technology
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Procter and Cognizant is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding The Procter Gamble and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Procter Gamble 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 The Procter Gamble 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 Procter Gamble i.e., Procter Gamble and Cognizant Technology go up and down completely randomly.
Pair Corralation between Procter Gamble and Cognizant Technology
Assuming the 90 days trading horizon Procter Gamble is expected to generate 1.06 times less return on investment than Cognizant Technology. In addition to that, Procter Gamble is 1.4 times more volatile than Cognizant Technology Solutions. It trades about 0.12 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.17 per unit of volatility. If you would invest 34,183 in Cognizant Technology Solutions on September 1, 2024 and sell it today you would earn a total of 9,150 from holding Cognizant Technology Solutions or generate 26.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
The Procter Gamble vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Procter Gamble |
| Cognizant Technology |
Procter Gamble and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Cognizant Technology
The main advantage of trading using opposite Procter Gamble and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble 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.| Procter Gamble vs. Charter Communications | Procter Gamble vs. Spotify Technology SA | Procter Gamble vs. Waste Management | Procter Gamble vs. Electronic Arts |
| Cognizant Technology vs. Fiserv Inc | Cognizant Technology vs. Fras le SA | Cognizant Technology vs. Energisa SA | Cognizant Technology vs. Clave Indices De |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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