Correlation Between Cognizant Technology and Allianz Technology

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

Diversification Opportunities for Cognizant Technology and Allianz Technology

0.56

Correlation Coefficient

Cognizant Technology  Allianz Technology

Very weak diversification

The 3 months correlation between Cognizant and Allianz is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Allianz Technology Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz Technology Trust 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 Allianz Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz Technology Trust has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Allianz Technology go up and down completely randomly.

Pair Corralation between Cognizant Technology and Allianz Technology

Assuming the 90 days trading horizon Cognizant Technology is expected to generate 1.05 times less return on investment than Allianz Technology. But when comparing it to its historical volatility, Cognizant Technology Solutions is 1.53 times less risky than Allianz Technology. It trades about 0.08 of its potential returns per unit of risk. Allianz Technology Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  39,750  in Allianz Technology Trust on November 29, 2024 and sell it today you would earn a total of  1,850  from holding Allianz Technology Trust or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Cognizant Technology Solutions  vs.  Allianz Technology Trust

Cognizant Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 6 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Allianz Technology Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz Technology Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Allianz Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cognizant Technology and Allianz Technology

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

The idea behind Cognizant Technology Solutions and Allianz Technology Trust 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.