Correlation Between Capgemini and Legrand SA
Can any of the company-specific risk be diversified away by investing in both Capgemini and Legrand SA 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 Capgemini and Legrand SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capgemini SE and Legrand SA, you can compare the effects of market volatilities on Capgemini and Legrand SA 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 Capgemini with a short position of Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capgemini and Legrand SA.
Diversification Opportunities for Capgemini and Legrand SA
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capgemini and Legrand is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Legrand SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA and Capgemini 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 Capgemini SE are associated (or correlated) with Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA has no effect on the direction of Capgemini i.e., Capgemini and Legrand SA go up and down completely randomly.
Pair Corralation between Capgemini and Legrand SA
Assuming the 90 days trading horizon Capgemini SE is expected to generate 0.88 times more return on investment than Legrand SA. However, Capgemini SE is 1.14 times less risky than Legrand SA. It trades about -0.2 of its potential returns per unit of risk. Legrand SA is currently generating about -0.2 per unit of risk. If you would invest 16,480 in Capgemini SE on August 31, 2024 and sell it today you would lose (1,315) from holding Capgemini SE or give up 7.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capgemini SE vs. Legrand SA
Performance |
| Timeline |
| Capgemini SE |
| Legrand SA |
Capgemini and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capgemini and Legrand SA
The main advantage of trading using opposite Capgemini and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capgemini position performs unexpectedly, Legrand SA 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 Legrand SA will offset losses from the drop in Legrand SA's long position.| Capgemini vs. Atos SE | Capgemini vs. Compagnie de Saint Gobain | Capgemini vs. Pernod Ricard SA | Capgemini vs. Bouygues SA |
| Legrand SA vs. Schneider Electric SE | Legrand SA vs. Publicis Groupe SA | Legrand SA vs. Pernod Ricard SA | Legrand SA vs. Compagnie Generale des |
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.
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