Correlation Between NTT Data and Capgemini

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

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

Diversification Opportunities for NTT Data and Capgemini

-0.6

Correlation Coefficient

NTT Data  Capgemini

Excellent diversification

The 3 months correlation between NTT and Capgemini is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NTT Data Corp and Capgemini SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE ADR and NTT Data 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 NTT Data Corp 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 ADR has no effect on the direction of NTT Data i.e., NTT Data and Capgemini go up and down completely randomly.

Pair Corralation between NTT Data and Capgemini

Assuming the 90 days horizon NTT Data Corp is expected to generate 1.66 times more return on investment than Capgemini. However, NTT Data is 1.66 times more volatile than Capgemini SE ADR. It trades about 0.09 of its potential returns per unit of risk. Capgemini SE ADR is currently generating about -0.1 per unit of risk. If you would invest  1,467  in NTT Data Corp on October 7, 2024 and sell it today you would earn a total of  445.00  from holding NTT Data Corp or generate 30.33% return on investment over 90 days.

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

NTT Data Corp  vs.  Capgemini SE ADR

NTT Data Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NTT Data Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NTT Data showed solid returns over the last few months and may actually be approaching a breakup point.

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NTT Data and Capgemini

The main advantage of trading using opposite NTT Data and Capgemini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NTT Data 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 NTT Data Corp and Capgemini SE ADR 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.