Correlation Between Cognizant Technology and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Unilever PLC 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 Unilever PLC 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 Unilever PLC, you can compare the effects of market volatilities on Cognizant Technology and Unilever PLC 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 Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Unilever PLC.
Diversification Opportunities for Cognizant Technology and Unilever PLC
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cognizant and Unilever is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC 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 Unilever PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever PLC has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Unilever PLC go up and down completely randomly.
Pair Corralation between Cognizant Technology and Unilever PLC
Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to generate 0.4 times more return on investment than Unilever PLC. However, Cognizant Technology Solutions is 2.53 times less risky than Unilever PLC. It trades about 0.14 of its potential returns per unit of risk. Unilever PLC is currently generating about -0.17 per unit of risk. If you would invest 133,621 in Cognizant Technology Solutions on September 6, 2024 and sell it today you would earn a total of 6,379 from holding Cognizant Technology Solutions or generate 4.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Cognizant Technology Solutions vs. Unilever PLC
Performance |
Timeline |
Cognizant Technology |
Unilever PLC |
Cognizant Technology and Unilever PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cognizant Technology and Unilever PLC
The main advantage of trading using opposite Cognizant Technology and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Unilever PLC 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 Unilever PLC will offset losses from the drop in Unilever PLC's long position.Cognizant Technology vs. Southern Copper | Cognizant Technology vs. McEwen Mining | Cognizant Technology vs. Micron Technology | Cognizant Technology vs. Verizon Communications |
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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 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.
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