Correlation Between Cognizant Technology and Texas Instruments

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

Diversification Opportunities for Cognizant Technology and Texas Instruments

0.49

Correlation Coefficient

Cognizant Technology  Texas Instruments

Very weak diversification

The 3 months correlation between Cognizant and Texas is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Texas Instruments Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Instruments 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 Texas Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Instruments has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Texas Instruments go up and down completely randomly.

Pair Corralation between Cognizant Technology and Texas Instruments

If you would invest  140,000  in Cognizant Technology Solutions on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Cognizant Technology Solutions or generate 0.0% return on investment over 90 days.

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

Cognizant Technology Solutions  vs.  Texas Instruments Incorporated

Cognizant Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Cognizant Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Texas Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Texas Instruments Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Texas Instruments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cognizant Technology and Texas Instruments

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

The idea behind Cognizant Technology Solutions and Texas Instruments Incorporated 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 Global Correlations module to find global opportunities by holding instruments from different markets.