Correlation Between Cognizant Technology and CF Industries
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and CF Industries 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 CF Industries 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 CF Industries Holdings, you can compare the effects of market volatilities on Cognizant Technology and CF Industries 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 CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and CF Industries.
Diversification Opportunities for Cognizant Technology and CF Industries
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cognizant and CF Industries is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and CF Industries go up and down completely randomly.
Pair Corralation between Cognizant Technology and CF Industries
Given the investment horizon of 90 days Cognizant Technology Solutions is expected to under-perform the CF Industries. But the stock apears to be less risky and, when comparing its historical volatility, Cognizant Technology Solutions is 1.92 times less risky than CF Industries. The stock trades about -0.3 of its potential returns per unit of risk. The CF Industries Holdings is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 8,301 in CF Industries Holdings on January 25, 2024 and sell it today you would lose (402.00) from holding CF Industries Holdings or give up 4.84% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Cognizant Technology Solutions vs. CF Industries Holdings
Performance |
Timeline |
Cognizant Technology |
CF Industries Holdings |
Cognizant Technology and CF Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cognizant Technology and CF Industries
The main advantage of trading using opposite Cognizant Technology and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, CF Industries 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 CF Industries will offset losses from the drop in CF Industries' 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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