Correlation Between Capgemini and Software Effective

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

Diversification Opportunities for Capgemini and Software Effective

-0.34

Correlation Coefficient

Capgemini  Software Effective

Very good diversification

The 3 months correlation between Capgemini and Software is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE ADR and Software Effective Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Effective 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 Software Effective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Effective has no effect on the direction of Capgemini i.e., Capgemini and Software Effective go up and down completely randomly.

Pair Corralation between Capgemini and Software Effective

Assuming the 90 days horizon Capgemini SE ADR is expected to generate 0.25 times more return on investment than Software Effective. However, Capgemini SE ADR is 4.01 times less risky than Software Effective. It trades about -0.01 of its potential returns per unit of risk. Software Effective Solutions is currently generating about -0.07 per unit of risk. If you would invest  3,245  in Capgemini SE ADR on December 22, 2024 and sell it today you would lose (99.00) from holding Capgemini SE ADR or give up 3.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Capgemini SE ADR  vs.  Software Effective Solutions

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.

Software Effective

Risk-Adjusted Performance

Very Weak

Over the last 90 days Software Effective Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in April 2025. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Pair Trading with Capgemini and Software Effective

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

The idea behind Capgemini SE ADR and Software Effective Solutions 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.