Correlation Between Cognizant Technology and Apple

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

Diversification Opportunities for Cognizant Technology and Apple

0.67

Correlation Coefficient

Cognizant Technology  Apple

Poor diversification

The 3 months correlation between Cognizant and Apple is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Apple go up and down completely randomly.

Pair Corralation between Cognizant Technology and Apple

Given the investment horizon of 90 days Cognizant Technology Solutions is expected to under-perform the Apple. But the stock apears to be less risky and, when comparing its historical volatility, Cognizant Technology Solutions is 1.45 times less risky than Apple. The stock trades about -0.33 of its potential returns per unit of risk. The Apple Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  16,971  in Apple Inc on January 26, 2024 and sell it today you would lose (69.00) from holding Apple Inc or give up 0.41% of portfolio value over 90 days.

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

Cognizant Technology Solutions  vs.  Apple Inc

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Cognizant Technology and Apple

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

The idea behind Cognizant Technology Solutions and Apple Inc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.