Correlation Between Sopra Steria and Capgemini

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

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

Diversification Opportunities for Sopra Steria and Capgemini

0.51

Correlation Coefficient

Sopra Steria  Capgemini

Very weak diversification

The 3 months correlation between Sopra and Capgemini is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sopra Steria Group and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE and Sopra Steria 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 Sopra Steria Group 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 Sopra Steria i.e., Sopra Steria and Capgemini go up and down completely randomly.

Pair Corralation between Sopra Steria and Capgemini

Assuming the 90 days trading horizon Sopra Steria Group is expected to under-perform the Capgemini. In addition to that, Sopra Steria is 1.01 times more volatile than Capgemini SE. It trades about -0.07 of its total potential returns per unit of risk. Capgemini SE is currently generating about 0.07 per unit of volatility. If you would invest  15,405  in Capgemini SE on October 15, 2024 and sell it today you would earn a total of  200.00  from holding Capgemini SE or generate 1.3% return on investment over 90 days.

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

Sopra Steria Group  vs.  Capgemini SE

Sopra Steria Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sopra Steria Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 weak performance in the last few months, the Stock's basic indicators remain somewhat 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 Sopra Steria and Capgemini

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