Correlation Between Capgemini and IBEX

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

Diversification Opportunities for Capgemini and IBEX

0.01

Correlation Coefficient

Capgemini  IBEX

Significant diversification

The 3 months correlation between Capgemini and IBEX is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE ADR and IBEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBEX 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 IBEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBEX has no effect on the direction of Capgemini i.e., Capgemini and IBEX go up and down completely randomly.

Pair Corralation between Capgemini and IBEX

Assuming the 90 days horizon Capgemini SE ADR is expected to under-perform the IBEX. In addition to that, Capgemini is 1.07 times more volatile than IBEX. It trades about -0.01 of its total potential returns per unit of risk. IBEX is currently generating about 0.11 per unit of volatility. If you would invest  2,145  in IBEX on December 29, 2024 and sell it today you would earn a total of  297.00  from holding IBEX or generate 13.85% return on investment over 90 days.

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

Capgemini SE ADR  vs.  IBEX

Capgemini SE ADR

Risk-Adjusted Performance

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 fairly strong primary indicators, Capgemini is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

IBEX

Risk-Adjusted Performance

OK

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

Pair Trading with Capgemini and IBEX

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

The idea behind Capgemini SE ADR and IBEX 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.