Correlation Between Capgemini and Alten SA

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

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

Diversification Opportunities for Capgemini and Alten SA

0.96

Correlation Coefficient

Capgemini  Alten SA

Almost no diversification

The 3 months correlation between Capgemini and Alten is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Alten SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alten SA and Capgemini 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 Capgemini SE are associated (or correlated) with Alten SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alten SA has no effect on the direction of Capgemini i.e., Capgemini and Alten SA go up and down completely randomly.

Pair Corralation between Capgemini and Alten SA

Assuming the 90 days trading horizon Capgemini SE is expected to under-perform the Alten SA. But the stock apears to be less risky and, when comparing its historical volatility, Capgemini SE is 1.19 times less risky than Alten SA. The stock trades about -0.16 of its potential returns per unit of risk. The Alten SA is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  9,615  in Alten SA on September 12, 2024 and sell it today you would lose (1,500) from holding Alten SA or give up 15.6% of portfolio value over 90 days.

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

Capgemini SE  vs.  Alten SA

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.

Alten SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alten SA 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 technical and fundamental 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 Capgemini and Alten SA

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

The idea behind Capgemini SE and Alten SA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.