Correlation Between Verizon Communications and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Cognizant Technology Solutions, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Cognizant Technology.
Diversification Opportunities for Verizon Communications and Cognizant Technology
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Verizon and Cognizant is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Cognizant Technology go up and down completely randomly.
Pair Corralation between Verizon Communications and Cognizant Technology
Assuming the 90 days trading horizon Verizon Communications is expected to generate 8.55 times more return on investment than Cognizant Technology. However, Verizon Communications is 8.55 times more volatile than Cognizant Technology Solutions. It trades about 0.05 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.3 per unit of risk. If you would invest 4,062 in Verizon Communications on August 24, 2024 and sell it today you would earn a total of 50.00 from holding Verizon Communications or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 85.0% |
| Values | Daily Returns |
Verizon Communications vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Verizon Communications |
| Cognizant Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Verizon Communications and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Cognizant Technology
The main advantage of trading using opposite Verizon Communications and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. T Mobile | Verizon Communications vs. Vodafone Group Public | Verizon Communications vs. ATT Inc | Verizon Communications vs. Telefnica Brasil 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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