Correlation Between Cognizant Technology and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Southwest Airlines 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 Southwest Airlines 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 Southwest Airlines Co, you can compare the effects of market volatilities on Cognizant Technology and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Southwest Airlines.
Diversification Opportunities for Cognizant Technology and Southwest Airlines
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cognizant and Southwest is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Southwest Airlines go up and down completely randomly.
Pair Corralation between Cognizant Technology and Southwest Airlines
If you would invest 16,456 in Southwest Airlines Co on September 25, 2024 and sell it today you would earn a total of 0.00 from holding Southwest Airlines Co or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 90.48% |
Values | Daily Returns |
Cognizant Technology Solutions vs. Southwest Airlines Co
Performance |
Timeline |
Cognizant Technology |
Southwest Airlines |
Cognizant Technology and Southwest Airlines Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cognizant Technology and Southwest Airlines
The main advantage of trading using opposite Cognizant Technology and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.Cognizant Technology vs. Accenture plc | Cognizant Technology vs. International Business Machines | Cognizant Technology vs. Infosys Limited | Cognizant Technology vs. Fiserv Inc |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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