Correlation Between IShares Trust and Cognizant Technology

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

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

Diversification Opportunities for IShares Trust and Cognizant Technology

0.33

Correlation Coefficient

IShares Trust  Cognizant Technology

Weak diversification

The 3 months correlation between IShares and Cognizant is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and IShares Trust 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 iShares Trust 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 IShares Trust i.e., IShares Trust and Cognizant Technology go up and down completely randomly.

Pair Corralation between IShares Trust and Cognizant Technology

Assuming the 90 days trading horizon iShares Trust is expected to under-perform the Cognizant Technology. In addition to that, IShares Trust is 12.66 times more volatile than Cognizant Technology Solutions. It trades about -0.26 of its total potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.22 per unit of volatility. If you would invest  139,394  in Cognizant Technology Solutions on September 4, 2024 and sell it today you would earn a total of  606.00  from holding Cognizant Technology Solutions or generate 0.43% return on investment over 90 days.

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

iShares Trust   vs.  Cognizant Technology Solutions

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cognizant Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Cognizant Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Trust and Cognizant Technology

The main advantage of trading using opposite IShares Trust and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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 iShares Trust 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.