Correlation Between Kyndryl Holdings and Cognizant Technology

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

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

Diversification Opportunities for Kyndryl Holdings and Cognizant Technology

0.45

Correlation Coefficient

Kyndryl Holdings  Cognizant Technology

Very weak diversification

The 3 months correlation between Kyndryl and Cognizant is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kyndryl Holdings and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Kyndryl Holdings 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 Kyndryl Holdings 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 Kyndryl Holdings i.e., Kyndryl Holdings and Cognizant Technology go up and down completely randomly.

Pair Corralation between Kyndryl Holdings and Cognizant Technology

Allowing for the 90-day total investment horizon Kyndryl Holdings is expected to generate 2.01 times less return on investment than Cognizant Technology. In addition to that, Kyndryl Holdings is 2.58 times more volatile than Cognizant Technology Solutions. It trades about 0.13 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.66 per unit of volatility. If you would invest  7,845  in Cognizant Technology Solutions on November 19, 2024 and sell it today you would earn a total of  1,225  from holding Cognizant Technology Solutions or generate 15.62% return on investment over 90 days.

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

Kyndryl Holdings  vs.  Cognizant Technology Solutions

Kyndryl Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kyndryl Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Kyndryl Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cognizant Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Cognizant Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kyndryl Holdings and Cognizant Technology

The main advantage of trading using opposite Kyndryl Holdings and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kyndryl Holdings 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 Kyndryl Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.