Correlation Between DigitalTown and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both DigitalTown 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 DigitalTown and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DigitalTown and Cognizant Technology Solutions, you can compare the effects of market volatilities on DigitalTown 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 DigitalTown with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of DigitalTown and Cognizant Technology.
Diversification Opportunities for DigitalTown and Cognizant Technology
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between DigitalTown and Cognizant is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DigitalTown and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and DigitalTown 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 DigitalTown 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 DigitalTown i.e., DigitalTown and Cognizant Technology go up and down completely randomly.
Pair Corralation between DigitalTown and Cognizant Technology
Given the investment horizon of 90 days DigitalTown is expected to generate 7.11 times more return on investment than Cognizant Technology. However, DigitalTown is 7.11 times more volatile than Cognizant Technology Solutions. It trades about 0.02 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about -0.01 per unit of risk. If you would invest 0.02 in DigitalTown on January 19, 2024 and sell it today you would lose (0.02) from holding DigitalTown or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
DigitalTown vs. Cognizant Technology Solutions
Performance |
| Timeline |
| DigitalTown |
| Cognizant Technology |
DigitalTown and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DigitalTown and Cognizant Technology
The main advantage of trading using opposite DigitalTown and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DigitalTown 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.| DigitalTown vs. Tautachrome | DigitalTown vs. Nukkleus | DigitalTown vs. AB International Group | DigitalTown vs. APT Systems |
| Cognizant Technology vs. International Business Machines | Cognizant Technology vs. Aurora Innovation | Cognizant Technology vs. ARB IOT Group | Cognizant Technology vs. 9F Inc |
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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