Correlation Between NVIDIA and Capgemini

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

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

Diversification Opportunities for NVIDIA and Capgemini

-0.03

Correlation Coefficient

NVIDIA  Capgemini

Good diversification

The 3 months correlation between NVIDIA and Capgemini is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Capgemini go up and down completely randomly.

Pair Corralation between NVIDIA and Capgemini

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Capgemini. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 1.04 times less risky than Capgemini. The stock trades about -0.02 of its potential returns per unit of risk. The Capgemini SE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15,788  in Capgemini SE on October 4, 2024 and sell it today you would earn a total of  201.00  from holding Capgemini SE or generate 1.27% return on investment over 90 days.

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

NVIDIA  vs.  Capgemini SE

NVIDIA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA 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

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.

Pair Trading with NVIDIA and Capgemini

The main advantage of trading using opposite NVIDIA and Capgemini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.