Correlation Between Capgemini and Xalles Holdings

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

Diversification Opportunities for Capgemini and Xalles Holdings

0.81

Correlation Coefficient

Capgemini  Xalles Holdings

Very poor diversification

The 3 months correlation between Capgemini and Xalles is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE ADR and Xalles Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xalles Holdings 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 Xalles Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xalles Holdings has no effect on the direction of Capgemini i.e., Capgemini and Xalles Holdings go up and down completely randomly.

Pair Corralation between Capgemini and Xalles Holdings

Assuming the 90 days horizon Capgemini is expected to generate 27.26 times less return on investment than Xalles Holdings. But when comparing it to its historical volatility, Capgemini SE ADR is 11.67 times less risky than Xalles Holdings. It trades about 0.03 of its potential returns per unit of risk. Xalles Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Xalles Holdings on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Xalles Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Capgemini SE ADR  vs.  Xalles Holdings

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.

Xalles Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xalles Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Capgemini and Xalles Holdings

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

The idea behind Capgemini SE ADR and Xalles Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.