Correlation Between Cognizant Technology and Katahdin Bankshares

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

Diversification Opportunities for Cognizant Technology and Katahdin Bankshares

0.5

Correlation Coefficient

Cognizant Technology  Katahdin Bankshares

Very weak diversification

The 3 months correlation between Cognizant and Katahdin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Katahdin Bankshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Katahdin Bankshares Corp 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 Katahdin Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Katahdin Bankshares Corp has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Katahdin Bankshares go up and down completely randomly.

Pair Corralation between Cognizant Technology and Katahdin Bankshares

Given the investment horizon of 90 days Cognizant Technology is expected to generate 1.56 times less return on investment than Katahdin Bankshares. But when comparing it to its historical volatility, Cognizant Technology Solutions is 1.72 times less risky than Katahdin Bankshares. It trades about 0.03 of its potential returns per unit of risk. Katahdin Bankshares Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,042  in Katahdin Bankshares Corp on October 23, 2024 and sell it today you would earn a total of  308.00  from holding Katahdin Bankshares Corp or generate 15.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.33%
Values	Daily Returns

Cognizant Technology Solutions  vs.  Katahdin Bankshares Corp

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.

Katahdin Bankshares Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Katahdin Bankshares Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Katahdin Bankshares is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cognizant Technology and Katahdin Bankshares

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

The idea behind Cognizant Technology Solutions and Katahdin Bankshares Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..