Correlation Between Cognizant Technology and Visa
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Visa 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 Visa 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 Visa Class A, you can compare the effects of market volatilities on Cognizant Technology and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Visa.
Diversification Opportunities for Cognizant Technology and Visa
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cognizant and Visa is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Visa go up and down completely randomly.
Pair Corralation between Cognizant Technology and Visa
Given the investment horizon of 90 days Cognizant Technology Solutions is expected to under-perform the Visa. In addition to that, Cognizant Technology is 1.49 times more volatile than Visa Class A. It trades about -0.33 of its total potential returns per unit of risk. Visa Class A is currently generating about -0.14 per unit of volatility. If you would invest 28,060 in Visa Class A on January 26, 2024 and sell it today you would lose (558.00) from holding Visa Class A or give up 1.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. Visa Class A
Performance |
| Timeline |
| Cognizant Technology |
| Visa Class A |
Cognizant Technology and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and Visa
The main advantage of trading using opposite Cognizant Technology and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.| Cognizant Technology vs. CACI International | Cognizant Technology vs. CDW Corp | Cognizant Technology vs. Jack Henry Associates | Cognizant Technology vs. Broadridge Financial Solutions |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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