Correlation Between Capgemini and Sodexo SA

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

Diversification Opportunities for Capgemini and Sodexo SA

-0.74

Correlation Coefficient

Capgemini  Sodexo SA

Pay attention - limited upside

The 3 months correlation between Capgemini and Sodexo is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Sodexo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sodexo 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 Sodexo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sodexo SA has no effect on the direction of Capgemini i.e., Capgemini and Sodexo SA go up and down completely randomly.

Pair Corralation between Capgemini and Sodexo SA

Assuming the 90 days trading horizon Capgemini is expected to generate 1.03 times less return on investment than Sodexo SA. But when comparing it to its historical volatility, Capgemini SE is 1.04 times less risky than Sodexo SA. It trades about 0.11 of its potential returns per unit of risk. Sodexo SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,672  in Sodexo SA on September 27, 2024 and sell it today you would earn a total of  168.00  from holding Sodexo SA or generate 2.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Capgemini SE  vs.  Sodexo 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.

Sodexo SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sodexo SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sodexo SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capgemini and Sodexo SA

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

The idea behind Capgemini SE and Sodexo 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.