Correlation Between Cognizant Technology and Gartner
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Gartner 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 Gartner 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 Gartner, you can compare the effects of market volatilities on Cognizant Technology and Gartner 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 Gartner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Gartner.
Diversification Opportunities for Cognizant Technology and Gartner
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cognizant and Gartner is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Gartner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gartner 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 Gartner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gartner has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Gartner go up and down completely randomly.
Pair Corralation between Cognizant Technology and Gartner
Given the investment horizon of 90 days Cognizant Technology Solutions is expected to under-perform the Gartner. But the stock apears to be less risky and, when comparing its historical volatility, Cognizant Technology Solutions is 1.36 times less risky than Gartner. The stock trades about -0.5 of its potential returns per unit of risk. The Gartner is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest 48,084 in Gartner on January 27, 2024 and sell it today you would lose (3,453) from holding Gartner or give up 7.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Gartner
Performance |
| Timeline |
| Cognizant Technology |
| Gartner |
Cognizant Technology and Gartner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Gartner
The main advantage of trading using opposite Cognizant Technology and Gartner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Gartner 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 Gartner will offset losses from the drop in Gartner's long position.| Cognizant Technology vs. Wipro Limited ADR | Cognizant Technology vs. Accenture plc | Cognizant Technology vs. Gartner | Cognizant Technology vs. CACI International |
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 Stocks Directory module to find actively traded stocks across global markets.
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