Correlation Between Cognizant Technology and Deutsche Bank

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

Diversification Opportunities for Cognizant Technology and Deutsche Bank

0.36

Correlation Coefficient

Cognizant Technology  Deutsche Bank

Weak diversification

The 3 months correlation between Cognizant and Deutsche is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Deutsche Bank Aktiengesellscha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank Aktien 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 Deutsche Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Bank Aktien has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Deutsche Bank go up and down completely randomly.

Pair Corralation between Cognizant Technology and Deutsche Bank

Assuming the 90 days trading horizon Cognizant Technology is expected to generate 17.39 times less return on investment than Deutsche Bank. But when comparing it to its historical volatility, Cognizant Technology Solutions is 1.94 times less risky than Deutsche Bank. It trades about 0.02 of its potential returns per unit of risk. Deutsche Bank Aktiengesellschaft is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  8,840  in Deutsche Bank Aktiengesellschaft on September 11, 2024 and sell it today you would earn a total of  1,965  from holding Deutsche Bank Aktiengesellschaft or generate 22.23% return on investment over 90 days.

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

Cognizant Technology Solutions  vs.  Deutsche Bank Aktiengesellscha

Cognizant Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat 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.

Deutsche Bank Aktien

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cognizant Technology and Deutsche Bank

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

The idea behind Cognizant Technology Solutions and Deutsche Bank Aktiengesellschaft 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.