Correlation Between NorAm Drilling and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling 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 NorAm Drilling and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorAm Drilling AS and Cognizant Technology Solutions, you can compare the effects of market volatilities on NorAm Drilling 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 NorAm Drilling with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Cognizant Technology.
Diversification Opportunities for NorAm Drilling and Cognizant Technology
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NorAm and Cognizant is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and NorAm Drilling 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 NorAm Drilling AS 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 NorAm Drilling i.e., NorAm Drilling and Cognizant Technology go up and down completely randomly.
Pair Corralation between NorAm Drilling and Cognizant Technology
Assuming the 90 days horizon NorAm Drilling is expected to generate 9.97 times less return on investment than Cognizant Technology. In addition to that, NorAm Drilling is 3.02 times more volatile than Cognizant Technology Solutions. It trades about 0.0 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.1 per unit of volatility. If you would invest 6,860 in Cognizant Technology Solutions on August 28, 2024 and sell it today you would earn a total of 744.00 from holding Cognizant Technology Solutions or generate 10.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Cognizant Technology Solutions
Performance |
| Timeline |
| NorAm Drilling AS |
| Cognizant Technology |
NorAm Drilling and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Cognizant Technology
The main advantage of trading using opposite NorAm Drilling and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling 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.| NorAm Drilling vs. Air Transport Services | NorAm Drilling vs. Pembina Pipeline Corp | NorAm Drilling vs. NAKED WINES PLC | NorAm Drilling vs. Fukuyama Transporting Co |
| Cognizant Technology vs. ATRESMEDIA | Cognizant Technology vs. SEI INVESTMENTS | Cognizant Technology vs. REGAL ASIAN INVESTMENTS | Cognizant Technology vs. ANTA SPORTS PRODUCT |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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