Correlation Between DXC Technology and Baker Steel

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

By analyzing existing cross correlation between DXC Technology Co and Baker Steel Resources, you can compare the effects of market volatilities on DXC Technology and Baker Steel 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 DXC Technology with a short position of Baker Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and Baker Steel.

Diversification Opportunities for DXC Technology and Baker Steel

0.56

Correlation Coefficient

DXC Technology  Baker Steel

Very weak diversification

The 3 months correlation between DXC and Baker is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources and DXC Technology 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 DXC Technology Co are associated (or correlated) with Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of DXC Technology i.e., DXC Technology and Baker Steel go up and down completely randomly.

Pair Corralation between DXC Technology and Baker Steel

Assuming the 90 days trading horizon DXC Technology is expected to generate 1.55 times less return on investment than Baker Steel. In addition to that, DXC Technology is 1.08 times more volatile than Baker Steel Resources. It trades about 0.07 of its total potential returns per unit of risk. Baker Steel Resources is currently generating about 0.12 per unit of volatility. If you would invest  4,950  in Baker Steel Resources on September 3, 2024 and sell it today you would earn a total of  850.00  from holding Baker Steel Resources or generate 17.17% return on investment over 90 days.

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

DXC Technology Co  vs.  Baker Steel Resources

DXC Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, DXC Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baker Steel Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Steel Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Baker Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DXC Technology and Baker Steel

The main advantage of trading using opposite DXC Technology and Baker Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology position performs unexpectedly, Baker Steel 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 Baker Steel will offset losses from the drop in Baker Steel's long position.

The idea behind DXC Technology Co and Baker Steel Resources 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.