Correlation Between Capgemini and Alten SA

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

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

Diversification Opportunities for Capgemini and Alten SA

-0.21

Correlation Coefficient

Capgemini  Alten SA

Very good diversification

The 3 months correlation between Capgemini and Alten is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Alten SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alten SA 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 Alten SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alten SA has no effect on the direction of Capgemini i.e., Capgemini and Alten SA go up and down completely randomly.

Pair Corralation between Capgemini and Alten SA

Assuming the 90 days trading horizon Capgemini SE is expected to under-perform the Alten SA. But the stock apears to be less risky and, when comparing its historical volatility, Capgemini SE is 1.43 times less risky than Alten SA. The stock trades about -0.04 of its potential returns per unit of risk. The Alten SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,735  in Alten SA on December 30, 2024 and sell it today you would earn a total of  1,390  from holding Alten SA or generate 17.97% return on investment over 90 days.

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

Capgemini SE  vs.  Alten SA

Capgemini SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capgemini SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Capgemini is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alten SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alten SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Alten SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capgemini and Alten SA

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

The idea behind Capgemini SE and Alten SA 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.