Correlation Between Capgemini and Thales SA

Can any of the company-specific risk be diversified away by investing in both Capgemini and Thales 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 Thales 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 Thales SA, you can compare the effects of market volatilities on Capgemini and Thales 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 Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capgemini and Thales SA.

Diversification Opportunities for Capgemini and Thales SA

-0.61

Correlation Coefficient

Capgemini  Thales SA

Excellent diversification

The 3 months correlation between Capgemini and Thales is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of Capgemini i.e., Capgemini and Thales SA go up and down completely randomly.

Pair Corralation between Capgemini and Thales SA

Assuming the 90 days trading horizon Capgemini SE is expected to under-perform the Thales SA. But the stock apears to be less risky and, when comparing its historical volatility, Capgemini SE is 1.26 times less risky than Thales SA. The stock trades about -0.04 of its potential returns per unit of risk. The Thales SA is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  13,750  in Thales SA on December 30, 2024 and sell it today you would earn a total of  10,910  from holding Thales SA or generate 79.35% return on investment over 90 days.

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

Capgemini SE  vs.  Thales 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.

Thales SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thales SA are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Thales SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capgemini and Thales SA

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

The idea behind Capgemini SE and Thales 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.