Correlation Between Raytheon Technologies and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies 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 Raytheon Technologies and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raytheon Technologies and Cognizant Technology Solutions, you can compare the effects of market volatilities on Raytheon Technologies 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 Raytheon Technologies with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Cognizant Technology.
Diversification Opportunities for Raytheon Technologies and Cognizant Technology
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Raytheon and Cognizant is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Raytheon Technologies 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 Raytheon Technologies 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 Raytheon Technologies i.e., Raytheon Technologies and Cognizant Technology go up and down completely randomly.
Pair Corralation between Raytheon Technologies and Cognizant Technology
Assuming the 90 days trading horizon Raytheon Technologies is expected to generate 11.91 times more return on investment than Cognizant Technology. However, Raytheon Technologies is 11.91 times more volatile than Cognizant Technology Solutions. It trades about 0.04 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.26 per unit of risk. If you would invest 11,769 in Raytheon Technologies on August 30, 2024 and sell it today you would earn a total of 134.00 from holding Raytheon Technologies or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Raytheon Technologies vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Raytheon Technologies |
| Cognizant Technology |
Raytheon Technologies and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raytheon Technologies and Cognizant Technology
The main advantage of trading using opposite Raytheon Technologies and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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.| Raytheon Technologies vs. Micron Technology | Raytheon Technologies vs. Spotify Technology SA | Raytheon Technologies vs. Charter Communications | Raytheon Technologies vs. Lupatech SA |
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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.
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