Correlation Between Cognizant Technology and Kyndryl Holdings

Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Kyndryl Holdings 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 Kyndryl Holdings 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 Kyndryl Holdings, you can compare the effects of market volatilities on Cognizant Technology and Kyndryl Holdings 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 Kyndryl Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Kyndryl Holdings.

Diversification Opportunities for Cognizant Technology and Kyndryl Holdings

0.3

Correlation Coefficient

Cognizant Technology  Kyndryl Holdings

Weak diversification

The 3 months correlation between Cognizant and Kyndryl is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Kyndryl Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyndryl Holdings 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 Kyndryl Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyndryl Holdings has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Kyndryl Holdings go up and down completely randomly.

Pair Corralation between Cognizant Technology and Kyndryl Holdings

Given the investment horizon of 90 days Cognizant Technology Solutions is expected to under-perform the Kyndryl Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Cognizant Technology Solutions is 3.71 times less risky than Kyndryl Holdings. The stock trades about -0.2 of its potential returns per unit of risk. The Kyndryl Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,196  in Kyndryl Holdings on February 9, 2024 and sell it today you would earn a total of  442.00  from holding Kyndryl Holdings or generate 20.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cognizant Technology Solutions  vs.  Kyndryl Holdings

Cognizant Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognizant Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Kyndryl Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kyndryl Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Kyndryl Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cognizant Technology and Kyndryl Holdings

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

The idea behind Cognizant Technology Solutions and Kyndryl Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.