Correlation Between Wipro Limited and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Wipro Limited 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 Wipro Limited and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wipro Limited ADR and Cognizant Technology Solutions, you can compare the effects of market volatilities on Wipro Limited 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 Wipro Limited with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wipro Limited and Cognizant Technology.
Diversification Opportunities for Wipro Limited and Cognizant Technology
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wipro and Cognizant is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Wipro Limited ADR and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Wipro Limited 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 Wipro Limited ADR 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 Wipro Limited i.e., Wipro Limited and Cognizant Technology go up and down completely randomly.
Pair Corralation between Wipro Limited and Cognizant Technology
Considering the 90-day investment horizon Wipro Limited ADR is expected to under-perform the Cognizant Technology. In addition to that, Wipro Limited is 1.89 times more volatile than Cognizant Technology Solutions. It trades about -0.2 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about -0.11 per unit of volatility. If you would invest 7,949 in Cognizant Technology Solutions on October 20, 2024 and sell it today you would lose (168.00) from holding Cognizant Technology Solutions or give up 2.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wipro Limited ADR vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Wipro Limited ADR |
| Cognizant Technology |
Wipro Limited and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wipro Limited and Cognizant Technology
The main advantage of trading using opposite Wipro Limited and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wipro Limited 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.| Wipro Limited vs. Cognizant Technology Solutions | Wipro Limited vs. Accenture plc | Wipro Limited vs. Fiserv Inc | Wipro Limited vs. Gartner |
| Cognizant Technology vs. Wipro Limited ADR | Cognizant Technology vs. Accenture plc | Cognizant Technology vs. Fiserv Inc | Cognizant Technology vs. Gartner |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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