Correlation Between Quaker Chemical and Cognizant Technology

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

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

Diversification Opportunities for Quaker Chemical and Cognizant Technology

0.53

Correlation Coefficient

Quaker Chemical  Cognizant Technology

Very weak diversification

The 3 months correlation between Quaker and Cognizant is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical i.e., Quaker Chemical and Cognizant Technology go up and down completely randomly.

Pair Corralation between Quaker Chemical and Cognizant Technology

Assuming the 90 days horizon Quaker Chemical is expected to generate 17.96 times less return on investment than Cognizant Technology. In addition to that, Quaker Chemical is 1.41 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 0.12 per unit of volatility. If you would invest  6,885  in Cognizant Technology Solutions on September 14, 2024 and sell it today you would earn a total of  884.00  from holding Cognizant Technology Solutions or generate 12.84% return on investment over 90 days.

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

Quaker Chemical  vs.  Cognizant Technology Solutions

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Quaker Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cognizant Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cognizant Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quaker Chemical and Cognizant Technology

The main advantage of trading using opposite Quaker Chemical and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quaker Chemical 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 Quaker Chemical 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.