Correlation Between Dupont De and Cognizant Technology

Can any of the company-specific risk be diversified away by investing in both Dupont De and Cognizant Technology 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 Dupont De and Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and Cognizant Technology Solutions, you can compare the effects of market volatilities on Dupont De and Cognizant Technology 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 Dupont De with a short position of Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Cognizant Technology.

Diversification Opportunities for Dupont De and Cognizant Technology

0.8

Correlation Coefficient

Dupont De  Cognizant Technology

Very poor diversification

The 3 months correlation between Dupont and Cognizant is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Dupont De 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 Dupont De Nemours are associated (or correlated) with Cognizant Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognizant Technology has no effect on the direction of Dupont De i.e., Dupont De and Cognizant Technology go up and down completely randomly.

Pair Corralation between Dupont De and Cognizant Technology

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Cognizant Technology. In addition to that, Dupont De is 1.23 times more volatile than Cognizant Technology Solutions. It trades about -0.01 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.0 per unit of volatility. If you would invest  7,649  in Cognizant Technology Solutions on December 29, 2024 and sell it today you would lose (59.00) from holding Cognizant Technology Solutions or give up 0.77% of portfolio value over 90 days.

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

Dupont De Nemours  vs.  Cognizant Technology Solutions

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cognizant Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognizant Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Dupont De and Cognizant Technology

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

The idea behind Dupont De Nemours and Cognizant Technology Solutions 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.