Correlation Between Capgemini and Science Applications

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

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

Diversification Opportunities for Capgemini and Science Applications

0.72

Correlation Coefficient

Capgemini  Science Applications

Poor diversification

The 3 months correlation between Capgemini and Science is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications 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 Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Capgemini i.e., Capgemini and Science Applications go up and down completely randomly.

Pair Corralation between Capgemini and Science Applications

Assuming the 90 days horizon Capgemini SE is expected to under-perform the Science Applications. In addition to that, Capgemini is 1.26 times more volatile than Science Applications International. It trades about 0.0 of its total potential returns per unit of risk. Science Applications International is currently generating about 0.02 per unit of volatility. If you would invest  11,011  in Science Applications International on October 22, 2024 and sell it today you would earn a total of  576.00  from holding Science Applications International or generate 5.23% return on investment over 90 days.

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

Capgemini SE  vs.  Science Applications Internati

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 fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Capgemini and Science Applications

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

The idea behind Capgemini SE and Science Applications International 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.

Check out your portfolio center.

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.