Correlation Between Capgemini and Data#3

Can any of the company-specific risk be diversified away by investing in both Capgemini and Data#3 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 Data#3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capgemini SE and Data3 Limited, you can compare the effects of market volatilities on Capgemini and Data#3 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 Data#3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capgemini and Data#3.

Diversification Opportunities for Capgemini and Data#3

0.06

Correlation Coefficient

Capgemini  Data#3

Significant diversification

The 3 months correlation between Capgemini and Data#3 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 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 Data#3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of Capgemini i.e., Capgemini and Data#3 go up and down completely randomly.

Pair Corralation between Capgemini and Data#3

Assuming the 90 days horizon Capgemini SE is expected to under-perform the Data#3. But the stock apears to be less risky and, when comparing its historical volatility, Capgemini SE is 1.51 times less risky than Data#3. The stock trades about -0.2 of its potential returns per unit of risk. The Data3 Limited is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  460.00  in Data3 Limited on September 23, 2024 and sell it today you would lose (84.00) from holding Data3 Limited or give up 18.26% of portfolio value over 90 days.

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

Capgemini SE  vs.  Data3 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 uncertain 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.

Data3 Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data3 Limited 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 Capgemini and Data#3

The main advantage of trading using opposite Capgemini and Data#3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capgemini position performs unexpectedly, Data#3 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 Data#3 will offset losses from the drop in Data#3's long position.

The idea behind Capgemini SE and Data3 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.