Correlation Between Capgemini and FUJITSU

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

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

Diversification Opportunities for Capgemini and FUJITSU

0.67

Correlation Coefficient

Capgemini  FUJITSU

Poor diversification

The 3 months correlation between Capgemini and FUJITSU is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and FUJITSU LTD ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUJITSU LTD ADR 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 FUJITSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUJITSU LTD ADR has no effect on the direction of Capgemini i.e., Capgemini and FUJITSU go up and down completely randomly.

Pair Corralation between Capgemini and FUJITSU

Assuming the 90 days horizon Capgemini SE is expected to under-perform the FUJITSU. But the stock apears to be less risky and, when comparing its historical volatility, Capgemini SE is 1.21 times less risky than FUJITSU. The stock trades about -0.14 of its potential returns per unit of risk. The FUJITSU LTD ADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,741  in FUJITSU LTD ADR on September 9, 2024 and sell it today you would lose (11.00) from holding FUJITSU LTD ADR or give up 0.63% of portfolio value over 90 days.

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

Capgemini SE  vs.  FUJITSU LTD ADR

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 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.

FUJITSU LTD ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FUJITSU LTD ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, FUJITSU is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Capgemini and FUJITSU

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

The idea behind Capgemini SE and FUJITSU LTD ADR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.