Correlation Between EMBARK EDUCATION and Capgemini

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

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

Diversification Opportunities for EMBARK EDUCATION and Capgemini

-0.64

Correlation Coefficient

EMBARK EDUCATION  Capgemini

Excellent diversification

The 3 months correlation between EMBARK and Capgemini is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding EMBARK EDUCATION LTD and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE and EMBARK EDUCATION 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 EMBARK EDUCATION LTD are associated (or correlated) with Capgemini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capgemini SE has no effect on the direction of EMBARK EDUCATION i.e., EMBARK EDUCATION and Capgemini go up and down completely randomly.

Pair Corralation between EMBARK EDUCATION and Capgemini

Assuming the 90 days horizon EMBARK EDUCATION LTD is expected to generate 0.28 times more return on investment than Capgemini. However, EMBARK EDUCATION LTD is 3.51 times less risky than Capgemini. It trades about 0.13 of its potential returns per unit of risk. Capgemini SE is currently generating about -0.07 per unit of risk. If you would invest  30.00  in EMBARK EDUCATION LTD on October 26, 2024 and sell it today you would earn a total of  1.00  from holding EMBARK EDUCATION LTD or generate 3.33% return on investment over 90 days.

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

EMBARK EDUCATION LTD  vs.  Capgemini SE

EMBARK EDUCATION LTD

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMBARK EDUCATION LTD are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EMBARK EDUCATION is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest uncertain 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 EMBARK EDUCATION and Capgemini

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

The idea behind EMBARK EDUCATION LTD and Capgemini SE 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.