Correlation Between Young Cos and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Young Cos 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 Young Cos and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Young Cos Brewery and Cognizant Technology Solutions, you can compare the effects of market volatilities on Young Cos 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 Young Cos with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Young Cos and Cognizant Technology.
Diversification Opportunities for Young Cos and Cognizant Technology
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Young and Cognizant is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Young Cos Brewery and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Young Cos 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 Young Cos Brewery 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 Young Cos i.e., Young Cos and Cognizant Technology go up and down completely randomly.
Pair Corralation between Young Cos and Cognizant Technology
Assuming the 90 days trading horizon Young Cos is expected to generate 2.19 times less return on investment than Cognizant Technology. But when comparing it to its historical volatility, Young Cos Brewery is 1.22 times less risky than Cognizant Technology. It trades about 0.11 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 7,479 in Cognizant Technology Solutions on August 28, 2024 and sell it today you would earn a total of 595.00 from holding Cognizant Technology Solutions or generate 7.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Young Cos Brewery vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Young Cos Brewery |
| Cognizant Technology |
Young Cos and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Young Cos and Cognizant Technology
The main advantage of trading using opposite Young Cos and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Young Cos 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.| Young Cos vs. Samsung Electronics Co | Young Cos vs. Samsung Electronics Co | Young Cos vs. Toyota Motor Corp | Young Cos vs. Hon Hai Precision |
| Cognizant Technology vs. Leroy Seafood Group | Cognizant Technology vs. Axfood AB | Cognizant Technology vs. Bell Food Group | Cognizant Technology vs. X FAB Silicon Foundries |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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