Correlation Between DOCDATA and Cognizant Technology

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

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

Diversification Opportunities for DOCDATA and Cognizant Technology

-0.48

Correlation Coefficient

DOCDATA  Cognizant Technology

Very good diversification

The 3 months correlation between DOCDATA and Cognizant is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding DOCDATA and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and DOCDATA 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 DOCDATA 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 DOCDATA i.e., DOCDATA and Cognizant Technology go up and down completely randomly.

Pair Corralation between DOCDATA and Cognizant Technology

Assuming the 90 days trading horizon DOCDATA is expected to under-perform the Cognizant Technology. In addition to that, DOCDATA is 2.99 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 0.03 per unit of volatility. If you would invest  6,502  in Cognizant Technology Solutions on October 4, 2024 and sell it today you would earn a total of  819.00  from holding Cognizant Technology Solutions or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.7%
Values	Daily Returns

DOCDATA  vs.  Cognizant Technology Solutions

DOCDATA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOCDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cognizant Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Cognizant Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DOCDATA and Cognizant Technology

The main advantage of trading using opposite DOCDATA and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOCDATA 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 DOCDATA 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.