Correlation Between Cognizant Technology and Science Applications

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

Diversification Opportunities for Cognizant Technology and Science Applications

-0.59

Correlation Coefficient

Cognizant Technology  Science Applications

Excellent diversification

The 3 months correlation between Cognizant and Science is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications 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 Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Science Applications go up and down completely randomly.

Pair Corralation between Cognizant Technology and Science Applications

Given the investment horizon of 90 days Cognizant Technology Solutions is expected to generate 0.99 times more return on investment than Science Applications. However, Cognizant Technology Solutions is 1.01 times less risky than Science Applications. It trades about 0.7 of its potential returns per unit of risk. Science Applications International is currently generating about 0.23 per unit of risk. If you would invest  6,806  in Cognizant Technology Solutions on February 17, 2025 and sell it today you would earn a total of  1,338  from holding Cognizant Technology Solutions or generate 19.66% return on investment over 90 days.

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

Cognizant Technology Solutions  vs.  Science Applications Internati

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 latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Science Applications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Science Applications International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, Science Applications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cognizant Technology and Science Applications

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

The idea behind Cognizant Technology Solutions and Science Applications International 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.