Correlation Between Capgemini and Alternet Systems

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

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

Diversification Opportunities for Capgemini and Alternet Systems

-0.08

Correlation Coefficient

Capgemini  Alternet Systems

Good diversification

The 3 months correlation between Capgemini and Alternet is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE ADR and Alternet Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alternet Systems 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 ADR are associated (or correlated) with Alternet Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alternet Systems has no effect on the direction of Capgemini i.e., Capgemini and Alternet Systems go up and down completely randomly.

Pair Corralation between Capgemini and Alternet Systems

Assuming the 90 days horizon Capgemini is expected to generate 48.31 times less return on investment than Alternet Systems. But when comparing it to its historical volatility, Capgemini SE ADR is 10.55 times less risky than Alternet Systems. It trades about 0.03 of its potential returns per unit of risk. Alternet Systems is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Alternet Systems on September 23, 2024 and sell it today you would earn a total of  0.02  from holding Alternet Systems or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Capgemini SE ADR  vs.  Alternet Systems

Capgemini SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capgemini SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly 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.

Alternet Systems

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alternet Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Alternet Systems demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capgemini and Alternet Systems

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

The idea behind Capgemini SE ADR and Alternet Systems 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.