Correlation Between Capgemini and Banxa Holdings

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

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

Diversification Opportunities for Capgemini and Banxa Holdings

-0.79

Correlation Coefficient

Capgemini  Banxa Holdings

Pay attention - limited upside

The 3 months correlation between Capgemini and Banxa is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE ADR and Banxa Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banxa Holdings 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 ADR are associated (or correlated) with Banxa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banxa Holdings has no effect on the direction of Capgemini i.e., Capgemini and Banxa Holdings go up and down completely randomly.

Pair Corralation between Capgemini and Banxa Holdings

Assuming the 90 days horizon Capgemini SE ADR is expected to under-perform the Banxa Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Capgemini SE ADR is 6.04 times less risky than Banxa Holdings. The pink sheet trades about -0.19 of its potential returns per unit of risk. The Banxa Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Banxa Holdings on September 4, 2024 and sell it today you would earn a total of  32.00  from holding Banxa Holdings or generate 114.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Capgemini SE ADR  vs.  Banxa Holdings

Capgemini SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capgemini SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly 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.

Banxa Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banxa Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Banxa Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capgemini and Banxa Holdings

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

The idea behind Capgemini SE ADR and Banxa Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.