Correlation Between Capgemini and CSL

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Can any of the company-specific risk be diversified away by investing in both Capgemini and CSL 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 CSL 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 CSL, you can compare the effects of market volatilities on Capgemini and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capgemini and CSL.

Diversification Opportunities for Capgemini and CSL

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Capgemini and CSL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE ADR and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of Capgemini i.e., Capgemini and CSL go up and down completely randomly.

Pair Corralation between Capgemini and CSL

Assuming the 90 days horizon Capgemini SE ADR is expected to generate 1.94 times more return on investment than CSL. However, Capgemini is 1.94 times more volatile than CSL. It trades about 0.06 of its potential returns per unit of risk. CSL is currently generating about 0.04 per unit of risk. If you would invest  3,444  in Capgemini SE ADR on September 4, 2022 and sell it today you would earn a total of  307.00  from holding Capgemini SE ADR or generate 8.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Capgemini SE ADR  vs.  CSL

 Performance (%) 
       Timeline  
Capgemini SE ADR 
Capgemini Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Capgemini SE ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Capgemini may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Capgemini Price Channel

CSL 
CSL Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in CSL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, CSL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CSL Price Channel

Capgemini and CSL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Capgemini and CSL

The main advantage of trading using opposite Capgemini and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capgemini position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.
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The idea behind Capgemini SE ADR and CSL 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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