Correlation Between Marks and Cognizant Technology

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

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

Diversification Opportunities for Marks and Cognizant Technology

0.33

Correlation Coefficient

Marks  Cognizant Technology

Weak diversification

The 3 months correlation between Marks and Cognizant is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Marks 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 Marks and Spencer 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 Marks i.e., Marks and Cognizant Technology go up and down completely randomly.

Pair Corralation between Marks and Cognizant Technology

Assuming the 90 days trading horizon Marks is expected to generate 2.64 times less return on investment than Cognizant Technology. In addition to that, Marks is 1.1 times more volatile than Cognizant Technology Solutions. It trades about 0.02 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.06 per unit of volatility. If you would invest  7,619  in Cognizant Technology Solutions on September 24, 2024 and sell it today you would earn a total of  371.00  from holding Cognizant Technology Solutions or generate 4.87% return on investment over 90 days.

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

Marks and Spencer  vs.  Cognizant Technology Solutions

Marks and Spencer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marks and Spencer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Marks is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cognizant Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cognizant Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Marks and Cognizant Technology

The main advantage of trading using opposite Marks and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marks 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.

The idea behind Marks and Spencer and Cognizant Technology Solutions 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.