Correlation Between Cognizant Technology and Humana

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

Diversification Opportunities for Cognizant Technology and Humana

0.11

Correlation Coefficient

Cognizant Technology  Humana

Average diversification

The 3 months correlation between Cognizant and Humana is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana 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 Humana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana Inc has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Humana go up and down completely randomly.

Pair Corralation between Cognizant Technology and Humana

Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to generate 0.68 times more return on investment than Humana. However, Cognizant Technology Solutions is 1.47 times less risky than Humana. It trades about 0.06 of its potential returns per unit of risk. Humana Inc is currently generating about -0.04 per unit of risk. If you would invest  5,651  in Cognizant Technology Solutions on September 1, 2024 and sell it today you would earn a total of  2,429  from holding Cognizant Technology Solutions or generate 42.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Cognizant Technology Solutions  vs.  Humana Inc

Cognizant Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cognizant Technology is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Humana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Cognizant Technology and Humana

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

The idea behind Cognizant Technology Solutions and Humana 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.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.