Correlation Between Capgemini and International Business

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

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

Diversification Opportunities for Capgemini and International Business

0.43

Correlation Coefficient

Capgemini  International Business

Very weak diversification

The 3 months correlation between Capgemini and International is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Capgemini i.e., Capgemini and International Business go up and down completely randomly.

Pair Corralation between Capgemini and International Business

Assuming the 90 days horizon Capgemini SE is expected to generate 0.56 times more return on investment than International Business. However, Capgemini SE is 1.8 times less risky than International Business. It trades about -0.13 of its potential returns per unit of risk. International Business Machines is currently generating about -0.27 per unit of risk. If you would invest  21,080  in Capgemini SE on January 31, 2024 and sell it today you would lose (630.00) from holding Capgemini SE or give up 2.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Capgemini SE  vs.  International Business Machine

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 nearly stable basic indicators, Capgemini is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Capgemini and International Business

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

The idea behind Capgemini SE and International Business Machines 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.