Correlation Between Linedata Services and Capgemini

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

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

Diversification Opportunities for Linedata Services and Capgemini

-0.02

Correlation Coefficient

Linedata Services  Capgemini

Good diversification

The 3 months correlation between Linedata and Capgemini is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Linedata Services SA and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE and Linedata Services 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 Linedata Services SA 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 Linedata Services i.e., Linedata Services and Capgemini go up and down completely randomly.

Pair Corralation between Linedata Services and Capgemini

Assuming the 90 days trading horizon Linedata Services SA is expected to generate 0.99 times more return on investment than Capgemini. However, Linedata Services SA is 1.01 times less risky than Capgemini. It trades about 0.05 of its potential returns per unit of risk. Capgemini SE is currently generating about 0.0 per unit of risk. If you would invest  7,680  in Linedata Services SA on December 2, 2024 and sell it today you would earn a total of  360.00  from holding Linedata Services SA or generate 4.69% return on investment over 90 days.

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

Linedata Services SA  vs.  Capgemini SE

Linedata Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Linedata Services SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Linedata Services is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 somewhat strong basic indicators, Capgemini is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Linedata Services and Capgemini

The main advantage of trading using opposite Linedata Services and Capgemini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linedata Services 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 Linedata Services SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.