Correlation Between Cognizant Technology and Converge Technology

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

Diversification Opportunities for Cognizant Technology and Converge Technology

-0.47

Correlation Coefficient

Cognizant Technology  Converge Technology

Very good diversification

The 3 months correlation between Cognizant and Converge is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Converge Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Technology 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 Converge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Technology has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Converge Technology go up and down completely randomly.

Pair Corralation between Cognizant Technology and Converge Technology

Given the investment horizon of 90 days Cognizant Technology Solutions is expected to under-perform the Converge Technology. But the stock apears to be less risky and, when comparing its historical volatility, Cognizant Technology Solutions is 2.06 times less risky than Converge Technology. The stock trades about -0.38 of its potential returns per unit of risk. The Converge Technology Solutions is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  433.00  in Converge Technology Solutions on January 18, 2024 and sell it today you would lose (37.00) from holding Converge Technology Solutions or give up 8.55% of portfolio value over 90 days.

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

Cognizant Technology Solutions  vs.  Converge Technology Solutions

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 latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Converge Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Converge Technology Solutions are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, Converge Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cognizant Technology and Converge Technology

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

The idea behind Cognizant Technology Solutions and Converge Technology Solutions 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.