Correlation Between International Business and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both International Business 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 International Business and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Cognizant Technology Solutions, you can compare the effects of market volatilities on International Business 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 International Business with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Cognizant Technology.
Diversification Opportunities for International Business and Cognizant Technology
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between International and Cognizant is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and International Business 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 International Business Machines 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 International Business i.e., International Business and Cognizant Technology go up and down completely randomly.
Pair Corralation between International Business and Cognizant Technology
Assuming the 90 days trading horizon International Business Machines is expected to generate 2.94 times more return on investment than Cognizant Technology. However, International Business is 2.94 times more volatile than Cognizant Technology Solutions. It trades about 0.09 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.14 per unit of risk. If you would invest 426,528 in International Business Machines on September 24, 2024 and sell it today you would earn a total of 36,472 from holding International Business Machines or generate 8.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
International Business Machine vs. Cognizant Technology Solutions
Performance |
Timeline |
International Business |
Cognizant Technology |
International Business and Cognizant Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with International Business and Cognizant Technology
The main advantage of trading using opposite International Business and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.International Business vs. Accenture plc | International Business vs. Fiserv Inc | International Business vs. Cognizant Technology Solutions | International Business vs. DXC Technology |
Cognizant Technology vs. Accenture plc | Cognizant Technology vs. International Business Machines | Cognizant Technology vs. Fiserv Inc | Cognizant Technology vs. DXC Technology |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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