Correlation Between Air Liquide and Capgemini

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

By analyzing existing cross correlation between Air Liquide SA and Capgemini SE, you can compare the effects of market volatilities on Air Liquide and Capgemini 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 Air Liquide with a short position of Capgemini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Liquide and Capgemini.

Diversification Opportunities for Air Liquide and Capgemini

0.91

Correlation Coefficient

Air Liquide  Capgemini

Almost no diversification

The 3 months correlation between Air and Capgemini is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE and Air Liquide 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 Air Liquide SA are associated (or correlated) with Capgemini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capgemini SE has no effect on the direction of Air Liquide i.e., Air Liquide and Capgemini go up and down completely randomly.

Pair Corralation between Air Liquide and Capgemini

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.72 times more return on investment than Capgemini. However, Air Liquide SA is 1.39 times less risky than Capgemini. It trades about 0.03 of its potential returns per unit of risk. Capgemini SE is currently generating about -0.01 per unit of risk. If you would invest  14,330  in Air Liquide SA on September 12, 2024 and sell it today you would earn a total of  1,674  from holding Air Liquide SA or generate 11.68% return on investment over 90 days.

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

Air Liquide SA  vs.  Capgemini SE

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Air Liquide is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capgemini SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capgemini SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Air Liquide and Capgemini

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

The idea behind Air Liquide SA and Capgemini SE 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.