Correlation Between Broadridge Financial and Cognizant Technology

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

Diversification Opportunities for Broadridge Financial and Cognizant Technology

0.82

Correlation Coefficient

Broadridge Financial  Cognizant Technology

Very poor diversification

The 3 months correlation between Broadridge and Cognizant is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Broadridge Financial Solutions and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Broadridge 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 Broadridge Financial Solutions 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 Broadridge Financial i.e., Broadridge Financial and Cognizant Technology go up and down completely randomly.

Pair Corralation between Broadridge Financial and Cognizant Technology

Allowing for the 90-day total investment horizon Broadridge Financial Solutions is expected to under-perform the Cognizant Technology. But the stock apears to be less risky and, when comparing its historical volatility, Broadridge Financial Solutions is 2.25 times less risky than Cognizant Technology. The stock trades about -0.08 of its potential returns per unit of risk. The Cognizant Technology Solutions is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,084  in Cognizant Technology Solutions on November 27, 2024 and sell it today you would earn a total of  400.00  from holding Cognizant Technology Solutions or generate 4.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Broadridge Financial Solutions  vs.  Cognizant Technology Solutions

Broadridge Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Broadridge Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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. Despite fairly strong basic indicators, Cognizant Technology is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Broadridge Financial and Cognizant Technology

The main advantage of trading using opposite Broadridge Financial and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadridge 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.

The idea behind Broadridge Financial Solutions and Cognizant 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.