Correlation Between Cognizant Technology and Atea ASA

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

Diversification Opportunities for Cognizant Technology and Atea ASA

0.76

Correlation Coefficient

Cognizant Technology  Atea ASA

Poor diversification

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

Pair Corralation between Cognizant Technology and Atea ASA

Assuming the 90 days horizon Cognizant Technology Solutions is expected to under-perform the Atea ASA. In addition to that, Cognizant Technology is 1.08 times more volatile than Atea ASA. It trades about -0.2 of its total potential returns per unit of risk. Atea ASA is currently generating about 0.08 per unit of volatility. If you would invest  1,186  in Atea ASA on October 10, 2024 and sell it today you would earn a total of  20.00  from holding Atea ASA or generate 1.69% return on investment over 90 days.

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

Cognizant Technology Solutions  vs.  Atea ASA

Cognizant Technology

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Atea ASA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atea ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Atea ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cognizant Technology and Atea ASA

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

The idea behind Cognizant Technology Solutions and Atea ASA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.