Correlation Between DXC Technology and X FAB

Can any of the company-specific risk be diversified away by investing in both DXC Technology and X FAB 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 X FAB 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 X FAB Silicon Foundries, you can compare the effects of market volatilities on DXC Technology and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and X FAB.

Diversification Opportunities for DXC Technology and X FAB

-0.58

Correlation Coefficient

DXC Technology  X FAB

Excellent diversification

The 3 months correlation between DXC and XFB is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of DXC Technology i.e., DXC Technology and X FAB go up and down completely randomly.

Pair Corralation between DXC Technology and X FAB

Assuming the 90 days trading horizon DXC Technology Co is expected to generate 0.74 times more return on investment than X FAB. However, DXC Technology Co is 1.35 times less risky than X FAB. It trades about 0.09 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.05 per unit of risk. If you would invest  1,861  in DXC Technology Co on September 3, 2024 and sell it today you would earn a total of  225.00  from holding DXC Technology Co or generate 12.09% return on investment over 90 days.

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

DXC Technology Co  vs.  X FAB Silicon Foundries

DXC Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DXC Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with DXC Technology and X FAB

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

The idea behind DXC Technology Co and X FAB Silicon Foundries 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.