Correlation Between Capgemini and Union Technologies

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

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

Diversification Opportunities for Capgemini and Union Technologies

-0.4

Correlation Coefficient

Capgemini  Union Technologies

Very good diversification

The 3 months correlation between Capgemini and Union is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Union Technologies Informatiqu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Technologies 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 Union Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Technologies has no effect on the direction of Capgemini i.e., Capgemini and Union Technologies go up and down completely randomly.

Pair Corralation between Capgemini and Union Technologies

Assuming the 90 days trading horizon Capgemini SE is expected to generate 0.34 times more return on investment than Union Technologies. However, Capgemini SE is 2.94 times less risky than Union Technologies. It trades about -0.01 of its potential returns per unit of risk. Union Technologies Informatique is currently generating about -0.04 per unit of risk. If you would invest  16,730  in Capgemini SE on October 5, 2024 and sell it today you would lose (1,230) from holding Capgemini SE or give up 7.35% of portfolio value over 90 days.

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

Capgemini SE  vs.  Union Technologies Informatiqu

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.

Union Technologies

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Technologies Informatique are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Union Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Capgemini and Union Technologies

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

The idea behind Capgemini SE and Union Technologies Informatique 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.