Correlation Between Capgemini and NCR Corp

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

Diversification Opportunities for Capgemini and NCR Corp

-0.38

Correlation Coefficient

Capgemini  NCR Corp

Very good diversification

The 3 months correlation between Capgemini and NCR is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE ADR and NCR Corp Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCR Corp Pref 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 NCR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCR Corp Pref has no effect on the direction of Capgemini i.e., Capgemini and NCR Corp go up and down completely randomly.

Pair Corralation between Capgemini and NCR Corp

Assuming the 90 days horizon Capgemini SE ADR is expected to under-perform the NCR Corp. In addition to that, Capgemini is 13.02 times more volatile than NCR Corp Pref. It trades about -0.1 of its total potential returns per unit of risk. NCR Corp Pref is currently generating about 0.11 per unit of volatility. If you would invest  115,750  in NCR Corp Pref on September 24, 2024 and sell it today you would earn a total of  1,375  from holding NCR Corp Pref or generate 1.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	51.81%
Values	Daily Returns

Capgemini SE ADR  vs.  NCR Corp Pref

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.

NCR Corp Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCR Corp Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, NCR Corp 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 NCR Corp

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

The idea behind Capgemini SE ADR and NCR Corp Pref 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.