Correlation Between Hyundai and Cognizant Technology

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

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

Diversification Opportunities for Hyundai and Cognizant Technology

-0.71

Correlation Coefficient

Hyundai  Cognizant Technology

Pay attention - limited upside

The 3 months correlation between Hyundai and Cognizant is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Hyundai 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 Hyundai Motor 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 Hyundai i.e., Hyundai and Cognizant Technology go up and down completely randomly.

Pair Corralation between Hyundai and Cognizant Technology

Assuming the 90 days trading horizon Hyundai Motor is expected to generate 1.54 times more return on investment than Cognizant Technology. However, Hyundai is 1.54 times more volatile than Cognizant Technology Solutions. It trades about 0.07 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.06 per unit of risk. If you would invest  2,525  in Hyundai Motor on September 18, 2024 and sell it today you would earn a total of  2,535  from holding Hyundai Motor or generate 100.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

Hyundai Motor  vs.  Cognizant Technology Solutions

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cognizant Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cognizant Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hyundai and Cognizant Technology

The main advantage of trading using opposite Hyundai and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai 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 Hyundai Motor 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.