Correlation Between Amadeus IT and Cognizant Technology

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

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

Diversification Opportunities for Amadeus IT and Cognizant Technology

0.64

Correlation Coefficient

Amadeus IT  Cognizant Technology

Poor diversification

The 3 months correlation between Amadeus and Cognizant is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amadeus IT Group and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology and Amadeus IT 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 Amadeus IT Group 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 Amadeus IT i.e., Amadeus IT and Cognizant Technology go up and down completely randomly.

Pair Corralation between Amadeus IT and Cognizant Technology

Assuming the 90 days trading horizon Amadeus IT Group is expected to generate 0.84 times more return on investment than Cognizant Technology. However, Amadeus IT Group is 1.2 times less risky than Cognizant Technology. It trades about -0.03 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about -0.04 per unit of risk. If you would invest  7,292  in Amadeus IT Group on March 20, 2025 and sell it today you would lose (296.00) from holding Amadeus IT Group or give up 4.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Amadeus IT Group  vs.  Cognizant Technology Solutions

Amadeus IT Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amadeus IT Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Amadeus IT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 nearly stable basic indicators, Cognizant Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Amadeus IT and Cognizant Technology

The main advantage of trading using opposite Amadeus IT and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amadeus IT 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 Amadeus IT Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.