Correlation Between Citigroup and Capgemini

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

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

Diversification Opportunities for Citigroup and Capgemini

-0.88

Correlation Coefficient

Citigroup  Capgemini

Pay attention - limited upside

The 3 months correlation between Citigroup and Capgemini is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Capgemini go up and down completely randomly.

Pair Corralation between Citigroup and Capgemini

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Capgemini. In addition to that, Citigroup is 1.07 times more volatile than Capgemini SE. It trades about -0.03 of its total potential returns per unit of risk. Capgemini SE is currently generating about 0.05 per unit of volatility. If you would invest  15,325  in Capgemini SE on September 23, 2024 and sell it today you would earn a total of  170.00  from holding Capgemini SE or generate 1.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Capgemini SE

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Citigroup and Capgemini

The main advantage of trading using opposite Citigroup and Capgemini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.