Correlation Between Capstone Technologies and Cognizant Technology

Can any of the company-specific risk be diversified away by investing in both Capstone Technologies 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 Capstone Technologies and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capstone Technologies Group and Cognizant Technology Solutions, you can compare the effects of market volatilities on Capstone Technologies 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 Capstone Technologies with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capstone Technologies and Cognizant Technology.

Diversification Opportunities for Capstone Technologies and Cognizant Technology

-0.31

Correlation Coefficient

Capstone Technologies  Cognizant Technology

Very good diversification

The 3 months correlation between Capstone and Cognizant is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Technologies Group and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Capstone Technologies 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 Capstone Technologies Group 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 Capstone Technologies i.e., Capstone Technologies and Cognizant Technology go up and down completely randomly.

Pair Corralation between Capstone Technologies and Cognizant Technology

Given the investment horizon of 90 days Capstone Technologies Group is expected to under-perform the Cognizant Technology. But the pink sheet apears to be less risky and, when comparing its historical volatility, Capstone Technologies Group is 3.64 times less risky than Cognizant Technology. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Cognizant Technology Solutions is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,649  in Cognizant Technology Solutions on December 30, 2024 and sell it today you would lose (59.00) from holding Cognizant Technology Solutions or give up 0.77% of portfolio value over 90 days.

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

Capstone Technologies Group  vs.  Cognizant Technology Solutions

Capstone Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capstone Technologies Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Capstone Technologies is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Cognizant Technology

Risk-Adjusted Performance

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 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 Capstone Technologies and Cognizant Technology

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

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.