Correlation Between Cognex and Pegasystems

Can any of the company-specific risk be diversified away by investing in both Cognex and Pegasystems 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 Cognex and Pegasystems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cognex and Pegasystems, you can compare the effects of market volatilities on Cognex and Pegasystems 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 Cognex with a short position of Pegasystems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognex and Pegasystems.

Diversification Opportunities for Cognex and Pegasystems

0.6

Correlation Coefficient

Cognex  Pegasystems

Poor diversification

The 3 months correlation between Cognex and Pegasystems is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cognex and Pegasystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegasystems and Cognex 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 Cognex are associated (or correlated) with Pegasystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegasystems has no effect on the direction of Cognex i.e., Cognex and Pegasystems go up and down completely randomly.

Pair Corralation between Cognex and Pegasystems

Given the investment horizon of 90 days Cognex is expected to generate 6.42 times less return on investment than Pegasystems. But when comparing it to its historical volatility, Cognex is 1.36 times less risky than Pegasystems. It trades about 0.05 of its potential returns per unit of risk. Pegasystems is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6,786  in Pegasystems on September 4, 2024 and sell it today you would earn a total of  2,662  from holding Pegasystems or generate 39.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cognex  vs.  Pegasystems

Cognex

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cognex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Cognex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pegasystems

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pegasystems are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Pegasystems sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cognex and Pegasystems

The main advantage of trading using opposite Cognex and Pegasystems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognex position performs unexpectedly, Pegasystems 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 Pegasystems will offset losses from the drop in Pegasystems' long position.

The idea behind Cognex and Pegasystems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.