Correlation Between Capgemini and Appen

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

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

Diversification Opportunities for Capgemini and Appen

-0.69

Correlation Coefficient

Capgemini  Appen

Excellent diversification

The 3 months correlation between Capgemini and Appen is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Appen Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appen Limited 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 Appen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appen Limited has no effect on the direction of Capgemini i.e., Capgemini and Appen go up and down completely randomly.

Pair Corralation between Capgemini and Appen

Assuming the 90 days horizon Capgemini SE is expected to under-perform the Appen. But the pink sheet apears to be less risky and, when comparing its historical volatility, Capgemini SE is 6.59 times less risky than Appen. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Appen Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Appen Limited on September 12, 2024 and sell it today you would earn a total of  103.00  from holding Appen Limited or generate 210.2% 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.  Appen Limited

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 primary 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.

Appen Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Appen Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Appen reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capgemini and Appen

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

The idea behind Capgemini SE and Appen Limited 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .