Correlation Between Vanguard Funds and Cognizant Technology

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

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

Diversification Opportunities for Vanguard Funds and Cognizant Technology

0.92

Correlation Coefficient

Vanguard Funds  Cognizant Technology

Almost no diversification

The 3 months correlation between Vanguard and Cognizant is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Vanguard Funds 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 Vanguard Funds Public 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 Vanguard Funds i.e., Vanguard Funds and Cognizant Technology go up and down completely randomly.

Pair Corralation between Vanguard Funds and Cognizant Technology

Assuming the 90 days trading horizon Vanguard Funds Public is expected to generate 0.51 times more return on investment than Cognizant Technology. However, Vanguard Funds Public is 1.95 times less risky than Cognizant Technology. It trades about 0.24 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.11 per unit of risk. If you would invest  9,622  in Vanguard Funds Public on September 13, 2024 and sell it today you would earn a total of  1,304  from holding Vanguard Funds Public or generate 13.55% return on investment over 90 days.

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

Vanguard Funds Public  vs.  Cognizant Technology Solutions

Vanguard Funds Public

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Vanguard Funds reported solid returns over the last few months and may actually be approaching a breakup point.

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 January 2025.

Pair Trading with Vanguard Funds and Cognizant Technology

The main advantage of trading using opposite Vanguard Funds and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Funds 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 Vanguard Funds Public 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.