Correlation Between Cognizant Technology and Crayon Group

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

Diversification Opportunities for Cognizant Technology and Crayon Group

-0.67

Correlation Coefficient

Cognizant Technology  Crayon Group

Excellent diversification

The 3 months correlation between Cognizant and Crayon is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Crayon Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crayon Group Holding 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 Crayon Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crayon Group Holding has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Crayon Group go up and down completely randomly.

Pair Corralation between Cognizant Technology and Crayon Group

Given the investment horizon of 90 days Cognizant Technology Solutions is expected to generate 0.65 times more return on investment than Crayon Group. However, Cognizant Technology Solutions is 1.54 times less risky than Crayon Group. It trades about 0.04 of its potential returns per unit of risk. Crayon Group Holding is currently generating about -0.02 per unit of risk. If you would invest  7,690  in Cognizant Technology Solutions on September 26, 2024 and sell it today you would earn a total of  259.00  from holding Cognizant Technology Solutions or generate 3.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Cognizant Technology Solutions  vs.  Crayon Group Holding

Cognizant Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Cognizant Technology is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Crayon Group Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crayon Group Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Crayon Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cognizant Technology and Crayon Group

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

The idea behind Cognizant Technology Solutions and Crayon Group Holding 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.