Correlation Between Capgemini and CDW

Can any of the company-specific risk be diversified away by investing in both Capgemini and CDW 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 CDW into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capgemini SE and CDW Corporation, you can compare the effects of market volatilities on Capgemini and CDW 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 CDW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capgemini and CDW.

Diversification Opportunities for Capgemini and CDW

0.93

Correlation Coefficient

Capgemini  CDW

Almost no diversification

The 3 months correlation between Capgemini and CDW is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and CDW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corporation 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 are associated (or correlated) with CDW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corporation has no effect on the direction of Capgemini i.e., Capgemini and CDW go up and down completely randomly.

Pair Corralation between Capgemini and CDW

Assuming the 90 days horizon Capgemini SE is expected to under-perform the CDW. But the stock apears to be less risky and, when comparing its historical volatility, Capgemini SE is 1.39 times less risky than CDW. The stock trades about -0.2 of its potential returns per unit of risk. The CDW Corporation is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  19,957  in CDW Corporation on September 23, 2024 and sell it today you would lose (3,287) from holding CDW Corporation or give up 16.47% of portfolio value over 90 days.

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

Capgemini SE  vs.  CDW Corp.

Capgemini SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capgemini SE 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CDW Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDW Corporation 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Capgemini and CDW

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

The idea behind Capgemini SE and CDW Corporation 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.