Correlation Between Capgemini and Glob Bioenergi

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

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

Diversification Opportunities for Capgemini and Glob Bioenergi

0.72

Correlation Coefficient

Capgemini  Glob Bioenergi

Poor diversification

The 3 months correlation between Capgemini and Glob is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Glob Bioenergi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glob Bioenergi 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 Glob Bioenergi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glob Bioenergi has no effect on the direction of Capgemini i.e., Capgemini and Glob Bioenergi go up and down completely randomly.

Pair Corralation between Capgemini and Glob Bioenergi

Assuming the 90 days trading horizon Capgemini SE is expected to under-perform the Glob Bioenergi. But the stock apears to be less risky and, when comparing its historical volatility, Capgemini SE is 2.52 times less risky than Glob Bioenergi. The stock trades about -0.08 of its potential returns per unit of risk. The Glob Bioenergi is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Glob Bioenergi on October 7, 2024 and sell it today you would earn a total of  8.00  from holding Glob Bioenergi or generate 10.0% return on investment over 90 days.

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

Capgemini SE  vs.  Glob Bioenergi

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Glob Bioenergi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glob Bioenergi has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Glob Bioenergi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Capgemini and Glob Bioenergi

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

The idea behind Capgemini SE and Glob Bioenergi 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.