Correlation Between Capgemini and FD Technologies

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

Diversification Opportunities for Capgemini and FD Technologies

-0.77

Correlation Coefficient

Capgemini  FD Technologies

Pay attention - limited upside

The 3 months correlation between Capgemini and FDRVF is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE ADR and FD Technologies Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FD Technologies Plc 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 FD Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FD Technologies Plc has no effect on the direction of Capgemini i.e., Capgemini and FD Technologies go up and down completely randomly.

Pair Corralation between Capgemini and FD Technologies

Assuming the 90 days horizon Capgemini is expected to generate 2.34 times less return on investment than FD Technologies. But when comparing it to its historical volatility, Capgemini SE ADR is 2.16 times less risky than FD Technologies. It trades about 0.05 of its potential returns per unit of risk. FD Technologies Plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,325  in FD Technologies Plc on September 25, 2024 and sell it today you would earn a total of  60.00  from holding FD Technologies Plc or generate 2.58% return on investment over 90 days.

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

Capgemini SE ADR  vs.  FD Technologies Plc

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.

FD Technologies Plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FD Technologies Plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, FD Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capgemini and FD Technologies

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

The idea behind Capgemini SE ADR and FD Technologies Plc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.