Correlation Between Cognizant Technology and SAP SE
Can any of the company-specific risk be diversified away by investing in both Cognizant Technology and SAP SE 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 SAP SE 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 SAP SE, you can compare the effects of market volatilities on Cognizant Technology and SAP SE 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 SAP SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognizant Technology and SAP SE.
Diversification Opportunities for Cognizant Technology and SAP SE
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cognizant and SAP is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cognizant Technology Solutions and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 SAP SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Cognizant Technology i.e., Cognizant Technology and SAP SE go up and down completely randomly.
Pair Corralation between Cognizant Technology and SAP SE
Assuming the 90 days trading horizon Cognizant Technology Solutions is expected to under-perform the SAP SE. In addition to that, Cognizant Technology is 1.04 times more volatile than SAP SE. It trades about -0.14 of its total potential returns per unit of risk. SAP SE is currently generating about -0.05 per unit of volatility. If you would invest 157,920 in SAP SE on July 26, 2025 and sell it today you would lose (8,175) from holding SAP SE or give up 5.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognizant Technology Solutions vs. SAP SE
Performance |
| Timeline |
| Cognizant Technology |
| SAP SE |
Cognizant Technology and SAP SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognizant Technology and SAP SE
The main advantage of trading using opposite Cognizant Technology and SAP SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognizant Technology position performs unexpectedly, SAP SE 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 SAP SE will offset losses from the drop in SAP SE's long position.| Cognizant Technology vs. Accenture plc | Cognizant Technology vs. International Business Machines | Cognizant Technology vs. Fiserv Inc | Cognizant Technology vs. Fidelity National Information |
| SAP SE vs. Principal Financial Group, | SAP SE vs. Global X Funds | SAP SE vs. Monster Beverage | SAP SE vs. Hormel Foods |
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 the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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