Correlation Between Capgemini and Nomura Research

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

Diversification Opportunities for Capgemini and Nomura Research

0.77

Correlation Coefficient

Capgemini  Nomura Research

Poor diversification

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

Pair Corralation between Capgemini and Nomura Research

Assuming the 90 days horizon Capgemini is expected to generate 6.46 times less return on investment than Nomura Research. But when comparing it to its historical volatility, Capgemini SE ADR is 1.04 times less risky than Nomura Research. It trades about 0.01 of its potential returns per unit of risk. Nomura Research Institute is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,315  in Nomura Research Institute on September 26, 2024 and sell it today you would earn a total of  653.00  from holding Nomura Research Institute or generate 28.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Capgemini SE ADR  vs.  Nomura Research Institute

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.

Nomura Research Institute

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nomura Research Institute has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential 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.

Pair Trading with Capgemini and Nomura Research

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

The idea behind Capgemini SE ADR and Nomura Research Institute 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.