Correlation Between Capgemini and Dassault Systemes

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

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

Diversification Opportunities for Capgemini and Dassault Systemes

0.84

Correlation Coefficient

Capgemini  Dassault Systemes

Very poor diversification

The 3 months correlation between Capgemini and Dassault is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Dassault Systemes SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Systemes 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 Dassault Systemes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Systemes has no effect on the direction of Capgemini i.e., Capgemini and Dassault Systemes go up and down completely randomly.

Pair Corralation between Capgemini and Dassault Systemes

Assuming the 90 days trading horizon Capgemini is expected to generate 5.61 times less return on investment than Dassault Systemes. In addition to that, Capgemini is 1.09 times more volatile than Dassault Systemes SE. It trades about 0.03 of its total potential returns per unit of risk. Dassault Systemes SE is currently generating about 0.18 per unit of volatility. If you would invest  3,265  in Dassault Systemes SE on November 29, 2024 and sell it today you would earn a total of  637.00  from holding Dassault Systemes SE or generate 19.51% return on investment over 90 days.

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

Capgemini SE  vs.  Dassault Systemes SE

Capgemini SE

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capgemini SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Dassault Systemes

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Systemes SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dassault Systemes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capgemini and Dassault Systemes

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

The idea behind Capgemini SE and Dassault Systemes 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.