Correlation Between Ameriprise Financial and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Ameriprise Financial and Cognizant 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 Ameriprise Financial and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameriprise Financial and Cognizant Technology Solutions, you can compare the effects of market volatilities on Ameriprise Financial and Cognizant 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 Ameriprise Financial with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriprise Financial and Cognizant Technology.
Diversification Opportunities for Ameriprise Financial and Cognizant Technology
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ameriprise and Cognizant is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Ameriprise Financial 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 Ameriprise Financial are associated (or correlated) with Cognizant Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognizant Technology has no effect on the direction of Ameriprise Financial i.e., Ameriprise Financial and Cognizant Technology go up and down completely randomly.
Pair Corralation between Ameriprise Financial and Cognizant Technology
Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 1.95 times more return on investment than Cognizant Technology. However, Ameriprise Financial is 1.95 times more volatile than Cognizant Technology Solutions. It trades about 0.35 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.02 per unit of risk. If you would invest 61,083 in Ameriprise Financial on September 9, 2024 and sell it today you would earn a total of 24,342 from holding Ameriprise Financial or generate 39.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ameriprise Financial vs. Cognizant Technology Solutions
Performance |
Timeline |
Ameriprise Financial |
Cognizant Technology |
Ameriprise Financial and Cognizant Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ameriprise Financial and Cognizant Technology
The main advantage of trading using opposite Ameriprise Financial and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial position performs unexpectedly, Cognizant 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 Cognizant Technology will offset losses from the drop in Cognizant Technology's long position.Ameriprise Financial vs. Apartment Investment and | Ameriprise Financial vs. Delta Air Lines | Ameriprise Financial vs. American Airlines Group | Ameriprise Financial vs. United Airlines Holdings |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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