Correlation Between TAL Education and Cognizant Technology

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

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

Diversification Opportunities for TAL Education and Cognizant Technology

-0.02

Correlation Coefficient

TAL Education  Cognizant Technology

Good diversification

The 3 months correlation between TAL and Cognizant is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and TAL Education 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 TAL Education Group 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 TAL Education i.e., TAL Education and Cognizant Technology go up and down completely randomly.

Pair Corralation between TAL Education and Cognizant Technology

If you would invest  588.00  in TAL Education Group on September 18, 2024 and sell it today you would earn a total of  16.00  from holding TAL Education Group or generate 2.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

TAL Education Group  vs.  Cognizant Technology Solutions

TAL Education Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, TAL Education sustained solid returns over the last few months and may actually be approaching a breakup point.

Cognizant Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cognizant Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TAL Education and Cognizant Technology

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

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.