Correlation Between Cognizant Technology and Visa

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Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Visa 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 Cognizant Technology and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cognizant Technology Solutions and Visa Class A, you can compare the effects of market volatilities on Cognizant Technology and Visa 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 Cognizant Technology with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Visa.

Diversification Opportunities for Cognizant Technology and Visa

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Cognizant and Visa is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A and Cognizant Technology 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 Cognizant Technology Solutions are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Visa go up and down completely randomly.

Pair Corralation between Cognizant Technology and Visa

Given the investment horizon of 90 days Cognizant Technology Solutions is expected to under-perform the Visa. In addition to that, Cognizant Technology is 1.33 times more volatile than Visa Class A. It trades about -0.01 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.05 per unit of volatility. If you would invest  21,360  in Visa Class A on December 29, 2023 and sell it today you would earn a total of  6,542  from holding Visa Class A or generate 30.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Cognizant Technology Solutions  vs.  Visa Class A

 Performance 
       Timeline  
Cognizant Technology 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Cognizant Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Cognizant Technology is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
Visa Class A 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Cognizant Technology and Visa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cognizant Technology and Visa

The main advantage of trading using opposite Cognizant Technology and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.
The idea behind Cognizant Technology Solutions and Visa Class A 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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