Correlation Between Cap Gemini and Aileron Therapeutics

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Can any of the company-specific risk be diversified away by investing in both Cap Gemini and Aileron Therapeutics 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 Cap Gemini and Aileron Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cap Gemini Sa and Aileron Therapeutics, you can compare the effects of market volatilities on Cap Gemini and Aileron Therapeutics 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 Cap Gemini with a short position of Aileron Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cap Gemini and Aileron Therapeutics.

Diversification Opportunities for Cap Gemini and Aileron Therapeutics

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between CGEMY and Aileron is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cap Gemini Sa and Aileron Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aileron Therapeutics and Cap Gemini 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 Cap Gemini Sa are associated (or correlated) with Aileron Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aileron Therapeutics has no effect on the direction of Cap Gemini i.e., Cap Gemini and Aileron Therapeutics go up and down completely randomly.

Pair Corralation between Cap Gemini and Aileron Therapeutics

Assuming the 90 days horizon Cap Gemini Sa is expected to generate 0.65 times more return on investment than Aileron Therapeutics. However, Cap Gemini Sa is 1.54 times less risky than Aileron Therapeutics. It trades about 0.15 of its potential returns per unit of risk. Aileron Therapeutics is currently generating about -0.29 per unit of risk. If you would invest  3,397  in Cap Gemini Sa on August 28, 2022 and sell it today you would earn a total of  338.00  from holding Cap Gemini Sa or generate 9.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Cap Gemini Sa  vs.  Aileron Therapeutics

 Performance (%) 
       Timeline  
Cap Gemini Sa 
CGEMY Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cap Gemini Sa are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Cap Gemini may actually be approaching a critical reversion point that can send shares even higher in December 2022.

CGEMY Price Channel

Aileron Therapeutics 
Aileron Performance
0 of 100
Over the last 90 days Aileron Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aileron Price Channel

Cap Gemini and Aileron Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cap Gemini and Aileron Therapeutics

The main advantage of trading using opposite Cap Gemini and Aileron Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cap Gemini position performs unexpectedly, Aileron Therapeutics 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 Aileron Therapeutics will offset losses from the drop in Aileron Therapeutics' long position.
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The idea behind Cap Gemini Sa and Aileron Therapeutics 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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