Correlation Between NIFTY SUMER and Cigniti Technologies

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

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

Diversification Opportunities for NIFTY SUMER and Cigniti Technologies

-0.11

Correlation Coefficient

NIFTY SUMER  Cigniti Technologies

Good diversification

The 3 months correlation between NIFTY and Cigniti is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and Cigniti Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigniti Technologies and NIFTY SUMER 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 NIFTY SUMER DURABLES are associated (or correlated) with Cigniti Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cigniti Technologies has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Cigniti Technologies go up and down completely randomly.

Pair Corralation between NIFTY SUMER and Cigniti Technologies

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to under-perform the Cigniti Technologies. But the index apears to be less risky and, when comparing its historical volatility, NIFTY SUMER DURABLES is 2.18 times less risky than Cigniti Technologies. The index trades about 0.0 of its potential returns per unit of risk. The Cigniti Technologies Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  139,090  in Cigniti Technologies Limited on September 12, 2024 and sell it today you would earn a total of  46,605  from holding Cigniti Technologies Limited or generate 33.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

NIFTY SUMER DURABLES  vs.  Cigniti Technologies Limited

Pair Trading with NIFTY SUMER and Cigniti Technologies

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

The idea behind NIFTY SUMER DURABLES and Cigniti Technologies Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.