Correlation Between Cognyte Software and Microsoft

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Can any of the company-specific risk be diversified away by investing in both Cognyte Software and Microsoft 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 Cognyte Software and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cognyte Software and Microsoft, you can compare the effects of market volatilities on Cognyte Software and Microsoft 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 Cognyte Software with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognyte Software and Microsoft.

Diversification Opportunities for Cognyte Software and Microsoft

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Cognyte and Microsoft is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cognyte Software and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Cognyte Software 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 Cognyte Software are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Cognyte Software i.e., Cognyte Software and Microsoft go up and down completely randomly.

Pair Corralation between Cognyte Software and Microsoft

Given the investment horizon of 90 days Cognyte Software is expected to under-perform the Microsoft. In addition to that, Cognyte Software is 2.36 times more volatile than Microsoft. It trades about -0.13 of its total potential returns per unit of risk. Microsoft is currently generating about 0.14 per unit of volatility. If you would invest  22,823  in Microsoft on September 9, 2022 and sell it today you would earn a total of  1,614  from holding Microsoft or generate 7.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Cognyte Software  vs.  Microsoft

 Performance (%) 
       Timeline  
Cognyte Software 
Cognyte Performance
0 of 100
Over the last 90 days Cognyte Software 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 2023. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cognyte Price Channel

Microsoft 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Cognyte Software and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cognyte Software and Microsoft

The main advantage of trading using opposite Cognyte Software and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognyte Software position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.
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The idea behind Cognyte Software and Microsoft 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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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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