Correlation Between Capgemini and NTT Data

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

Diversification Opportunities for Capgemini and NTT Data

0.75

Correlation Coefficient

Capgemini  NTT Data

Poor diversification

The 3 months correlation between Capgemini and NTT is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE ADR and NTT Data Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTT Data Corp 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 NTT Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTT Data Corp has no effect on the direction of Capgemini i.e., Capgemini and NTT Data go up and down completely randomly.

Pair Corralation between Capgemini and NTT Data

Assuming the 90 days horizon Capgemini SE ADR is expected to generate 1.15 times more return on investment than NTT Data. However, Capgemini is 1.15 times more volatile than NTT Data Corp. It trades about 0.0 of its potential returns per unit of risk. NTT Data Corp is currently generating about -0.03 per unit of risk. If you would invest  3,227  in Capgemini SE ADR on December 28, 2024 and sell it today you would lose (59.00) from holding Capgemini SE ADR or give up 1.83% of portfolio value over 90 days.

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

Capgemini SE ADR  vs.  NTT Data Corp

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.

NTT Data Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days NTT Data Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, NTT Data is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capgemini and NTT Data

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

The idea behind Capgemini SE ADR and NTT Data Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.