Correlation Between Grupo Industrial and Cognizant Technology

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

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

Diversification Opportunities for Grupo Industrial and Cognizant Technology

-0.74

Correlation Coefficient

Grupo Industrial  Cognizant Technology

Pay attention - limited upside

The 3 months correlation between Grupo and Cognizant is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Industrial Saltillo and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Grupo Industrial 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 Grupo Industrial Saltillo 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 Grupo Industrial i.e., Grupo Industrial and Cognizant Technology go up and down completely randomly.

Pair Corralation between Grupo Industrial and Cognizant Technology

Assuming the 90 days trading horizon Grupo Industrial Saltillo is expected to under-perform the Cognizant Technology. In addition to that, Grupo Industrial is 2.82 times more volatile than Cognizant Technology Solutions. It trades about -0.08 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.14 per unit of volatility. If you would invest  133,621  in Cognizant Technology Solutions on October 11, 2024 and sell it today you would earn a total of  6,379  from holding Cognizant Technology Solutions or generate 4.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Grupo Industrial Saltillo  vs.  Cognizant Technology Solutions

Grupo Industrial Saltillo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Industrial Saltillo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cognizant Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly 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.

Pair Trading with Grupo Industrial and Cognizant Technology

The main advantage of trading using opposite Grupo Industrial and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Industrial 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 Grupo Industrial Saltillo 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.