Correlation Between Mitsui Chemicals and Cognizant Technology

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

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

Diversification Opportunities for Mitsui Chemicals and Cognizant Technology

0.0

Correlation Coefficient

Mitsui Chemicals  Cognizant Technology

Pay attention - limited upside

The 3 months correlation between Mitsui and Cognizant is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Mitsui Chemicals 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 Mitsui Chemicals 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 Mitsui Chemicals i.e., Mitsui Chemicals and Cognizant Technology go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Cognizant Technology

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 14.66 times less return on investment than Cognizant Technology. In addition to that, Mitsui Chemicals is 1.24 times more volatile than Cognizant Technology Solutions. It trades about 0.0 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.04 per unit of volatility. If you would invest  6,023  in Cognizant Technology Solutions on October 27, 2024 and sell it today you would earn a total of  1,556  from holding Cognizant Technology Solutions or generate 25.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Mitsui Chemicals  vs.  Cognizant Technology Solutions

Mitsui Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Mitsui Chemicals 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cognizant Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mitsui Chemicals and Cognizant Technology

The main advantage of trading using opposite Mitsui Chemicals and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui Chemicals 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 Mitsui Chemicals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.