Correlation Between Monks Investment and Cognizant Technology

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

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

Diversification Opportunities for Monks Investment and Cognizant Technology

0.87

Correlation Coefficient

Monks Investment  Cognizant Technology

Very poor diversification

The 3 months correlation between Monks and Cognizant is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Monks Investment 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 Monks Investment Trust 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 Monks Investment i.e., Monks Investment and Cognizant Technology go up and down completely randomly.

Pair Corralation between Monks Investment and Cognizant Technology

Assuming the 90 days trading horizon Monks Investment Trust is expected to generate 0.99 times more return on investment than Cognizant Technology. However, Monks Investment Trust is 1.01 times less risky than Cognizant Technology. It trades about -0.07 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about -0.08 per unit of risk. If you would invest  128,400  in Monks Investment Trust on September 27, 2024 and sell it today you would lose (1,600) from holding Monks Investment Trust or give up 1.25% of portfolio value over 90 days.

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

Monks Investment Trust  vs.  Cognizant Technology Solutions

Monks Investment Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cognizant Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cognizant Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Monks Investment and Cognizant Technology

The main advantage of trading using opposite Monks Investment and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monks Investment 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 Monks Investment Trust 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .