Correlation Between Cognizant Technology and CDW

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

Diversification Opportunities for Cognizant Technology and CDW

-0.76

Correlation Coefficient

Cognizant Technology  CDW

Pay attention - limited upside

The 3 months correlation between Cognizant and CDW is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and CDW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corporation 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 CDW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corporation has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and CDW go up and down completely randomly.

Pair Corralation between Cognizant Technology and CDW

Assuming the 90 days horizon Cognizant Technology Solutions is expected to generate 0.81 times more return on investment than CDW. However, Cognizant Technology Solutions is 1.23 times less risky than CDW. It trades about 0.06 of its potential returns per unit of risk. CDW Corporation is currently generating about -0.07 per unit of risk. If you would invest  7,500  in Cognizant Technology Solutions on September 23, 2024 and sell it today you would earn a total of  98.00  from holding Cognizant Technology Solutions or generate 1.31% return on investment over 90 days.

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

Cognizant Technology Solutions  vs.  CDW Corp.

Cognizant Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cognizant Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CDW Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDW Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cognizant Technology and CDW

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

The idea behind Cognizant Technology Solutions and CDW Corporation 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.