Correlation Between Cognizant Technology and Infosys

Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and Infosys 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 Infosys 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 Infosys Ltd ADR, you can compare the effects of market volatilities on Cognizant Technology and Infosys 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 Infosys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and Infosys.

Diversification Opportunities for Cognizant Technology and Infosys

0.57

Correlation Coefficient

Cognizant Technology  Infosys

Very weak diversification

The 3 months correlation between Cognizant and Infosys is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Infosys Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Ltd ADR 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Ltd ADR has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Infosys go up and down completely randomly.

Pair Corralation between Cognizant Technology and Infosys

Given the investment horizon of 90 days Cognizant Technology Solutions is expected to under-perform the Infosys. But the stock apears to be less risky and, when comparing its historical volatility, Cognizant Technology Solutions is 1.18 times less risky than Infosys. The stock trades about -0.06 of its potential returns per unit of risk. The Infosys Ltd ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,763  in Infosys Ltd ADR on May 2, 2025 and sell it today you would lose (68.00) from holding Infosys Ltd ADR or give up 3.86% of portfolio value over 90 days.

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

Cognizant Technology Solutions  vs.  Infosys Ltd ADR

Cognizant Technology

Risk-Adjusted Performance

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 current stock price confusion, may contribute to short-horizon losses for the traders.

Infosys Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Infosys is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cognizant Technology and Infosys

The main advantage of trading using opposite Cognizant Technology and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Infosys 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 Infosys will offset losses from the drop in Infosys' long position.

The idea behind Cognizant Technology Solutions and Infosys Ltd ADR 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.