Correlation Between Cognizant Technology and Apple Hospitality

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

Diversification Opportunities for Cognizant Technology and Apple Hospitality

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Cognizant and Apple is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and Apple Hospitality REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Hospitality REIT 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 Apple Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Hospitality REIT has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and Apple Hospitality go up and down completely randomly.

Pair Corralation between Cognizant Technology and Apple Hospitality

Given the investment horizon of 90 days Cognizant Technology Solutions is expected to generate 1.97 times more return on investment than Apple Hospitality. However, Cognizant Technology is 1.97 times more volatile than Apple Hospitality REIT. It trades about 0.07 of its potential returns per unit of risk. Apple Hospitality REIT is currently generating about 0.1 per unit of risk. If you would invest  5,999  in Cognizant Technology Solutions on September 3, 2022 and sell it today you would earn a total of  240.00  from holding Cognizant Technology Solutions or generate 4.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cognizant Technology Solutions  vs.  Apple Hospitality REIT

 Performance (%) 
       Timeline  
Cognizant Technology 
Cognizant Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cognizant Technology Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cognizant Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Cognizant Price Channel

Apple Hospitality REIT 
Apple Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Apple Hospitality REIT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Apple Hospitality may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Apple Price Channel

Cognizant Technology and Apple Hospitality Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cognizant Technology and Apple Hospitality

The main advantage of trading using opposite Cognizant Technology and Apple Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, Apple Hospitality 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 Apple Hospitality will offset losses from the drop in Apple Hospitality's long position.
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The idea behind Cognizant Technology Solutions and Apple Hospitality REIT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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