Correlation Between Cognizant Technology and United Parcel

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

Diversification Opportunities for Cognizant Technology and United Parcel

0.21

Correlation Coefficient

Cognizant Technology  United Parcel

Modest diversification

The 3 months correlation between Cognizant and United is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and United Parcel go up and down completely randomly.

Pair Corralation between Cognizant Technology and United Parcel

If you would invest  254,915  in United Parcel Service on February 19, 2024 and sell it today you would lose (1,915) from holding United Parcel Service or give up 0.75% of portfolio value over 90 days.

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

Cognizant Technology Solutions  vs.  United Parcel Service

Cognizant Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognizant Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

United Parcel Service

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cognizant Technology and United Parcel

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

The idea behind Cognizant Technology Solutions and United Parcel Service 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.