Correlation Between Cognizant Technology and Information Services
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Information Services 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 Cognizant Technology and Information Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cognizant Technology Solutions and Information Services Group, you can compare the effects of market volatilities on Cognizant Technology and Information Services 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 Cognizant Technology with a short position of Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Information Services.
Diversification Opportunities for Cognizant Technology and Information Services
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cognizant and Information is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Information Services Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services and Cognizant Technology 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 Cognizant Technology Solutions are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Information Services go up and down completely randomly.
Pair Corralation between Cognizant Technology and Information Services
Given the investment horizon of 90 days Cognizant Technology is expected to generate 1.61 times less return on investment than Information Services. But when comparing it to its historical volatility, Cognizant Technology Solutions is 1.35 times less risky than Information Services. It trades about 0.04 of its potential returns per unit of risk. Information Services Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 318.00 in Information Services Group on September 26, 2024 and sell it today you would earn a total of 17.00 from holding Information Services Group or generate 5.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Cognizant Technology Solutions vs. Information Services Group
Performance |
Timeline |
Cognizant Technology |
Information Services |
Cognizant Technology and Information Services Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cognizant Technology and Information Services
The main advantage of trading using opposite Cognizant Technology and Information Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Information Services 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 Information Services will offset losses from the drop in Information Services' long position.Cognizant Technology vs. Wipro Limited ADR | Cognizant Technology vs. Accenture plc | Cognizant Technology vs. Gartner | Cognizant Technology vs. CACI International |
Information Services vs. Formula Systems 1985 | Information Services vs. CSP Inc | Information Services vs. Nayax | Information Services vs. The Hackett Group |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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