Correlation Between Capgemini and Hotel Majestic

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

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

Diversification Opportunities for Capgemini and Hotel Majestic

-0.04

Correlation Coefficient

Capgemini  Hotel Majestic

Good diversification

The 3 months correlation between Capgemini and Hotel is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Hotel Majestic Cannes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Majestic Cannes 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 Hotel Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Majestic Cannes has no effect on the direction of Capgemini i.e., Capgemini and Hotel Majestic go up and down completely randomly.

Pair Corralation between Capgemini and Hotel Majestic

Assuming the 90 days trading horizon Capgemini is expected to generate 21.23 times less return on investment than Hotel Majestic. But when comparing it to its historical volatility, Capgemini SE is 1.62 times less risky than Hotel Majestic. It trades about 0.0 of its potential returns per unit of risk. Hotel Majestic Cannes is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  327,584  in Hotel Majestic Cannes on September 28, 2024 and sell it today you would earn a total of  192,416  from holding Hotel Majestic Cannes or generate 58.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.84%
Values	Daily Returns

Capgemini SE  vs.  Hotel Majestic Cannes

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hotel Majestic Cannes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotel Majestic Cannes has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Hotel Majestic is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Capgemini and Hotel Majestic

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

The idea behind Capgemini SE and Hotel Majestic Cannes 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.