Correlation Between Farmers Merchants and Capgemini

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Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Capgemini 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 Farmers Merchants and Capgemini into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmers Merchants Bancorp and Capgemini SE, you can compare the effects of market volatilities on Farmers Merchants and Capgemini 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 Farmers Merchants with a short position of Capgemini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Capgemini.

Diversification Opportunities for Farmers Merchants and Capgemini

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Farmers and Capgemini is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE and Farmers Merchants 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 Farmers Merchants Bancorp are associated (or correlated) with Capgemini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capgemini SE has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Capgemini go up and down completely randomly.

Pair Corralation between Farmers Merchants and Capgemini

Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 0.91 times more return on investment than Capgemini. However, Farmers Merchants Bancorp is 1.1 times less risky than Capgemini. It trades about 0.04 of its potential returns per unit of risk. Capgemini SE is currently generating about 0.04 per unit of risk. If you would invest  104,570  in Farmers Merchants Bancorp on October 4, 2024 and sell it today you would earn a total of  1,430  from holding Farmers Merchants Bancorp or generate 1.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Farmers Merchants Bancorp  vs.  Capgemini SE

 Performance 
       Timeline  
Farmers Merchants Bancorp 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Merchants Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Farmers Merchants may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Capgemini SE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Farmers Merchants and Capgemini Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Farmers Merchants and Capgemini

The main advantage of trading using opposite Farmers Merchants and Capgemini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Capgemini 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 Capgemini will offset losses from the drop in Capgemini's long position.
The idea behind Farmers Merchants Bancorp and Capgemini SE 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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