Correlation Between Laureate Education and Capgemini

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

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

Diversification Opportunities for Laureate Education and Capgemini

0.43

Correlation Coefficient

Laureate Education  Capgemini

Very weak diversification

The 3 months correlation between Laureate and Capgemini is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE and Laureate Education 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 Laureate Education 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 Laureate Education i.e., Laureate Education and Capgemini go up and down completely randomly.

Pair Corralation between Laureate Education and Capgemini

Assuming the 90 days trading horizon Laureate Education is expected to generate 0.83 times more return on investment than Capgemini. However, Laureate Education is 1.2 times less risky than Capgemini. It trades about 0.02 of its potential returns per unit of risk. Capgemini SE is currently generating about -0.04 per unit of risk. If you would invest  1,750  in Laureate Education on December 23, 2024 and sell it today you would earn a total of  20.00  from holding Laureate Education or generate 1.14% return on investment over 90 days.

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

Laureate Education  vs.  Capgemini SE

Laureate Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Laureate Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Laureate Education is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Capgemini SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capgemini SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Capgemini is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Laureate Education and Capgemini

The main advantage of trading using opposite Laureate Education and Capgemini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laureate Education 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 Laureate Education 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.