Correlation Between Cognizant Technology and Firan Technology

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

Diversification Opportunities for Cognizant Technology and Firan Technology

0.72

Correlation Coefficient

Cognizant Technology  Firan Technology

Poor diversification

The 3 months correlation between Cognizant and Firan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Firan Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firan Technology 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 Firan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firan Technology has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Firan Technology go up and down completely randomly.

Pair Corralation between Cognizant Technology and Firan Technology

Assuming the 90 days horizon Cognizant Technology Solutions is expected to under-perform the Firan Technology. But the stock apears to be less risky and, when comparing its historical volatility, Cognizant Technology Solutions is 1.26 times less risky than Firan Technology. The stock trades about -0.06 of its potential returns per unit of risk. The Firan Technology Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  472.00  in Firan Technology Group on December 23, 2024 and sell it today you would lose (30.00) from holding Firan Technology Group or give up 6.36% of portfolio value over 90 days.

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

Cognizant Technology Solutions  vs.  Firan Technology Group

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 nearly stable basic indicators, Cognizant Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Firan Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Firan Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Firan Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cognizant Technology and Firan Technology

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

The idea behind Cognizant Technology Solutions and Firan Technology Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.