Correlation Between Amazon and DXC Technology

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

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

Diversification Opportunities for Amazon and DXC Technology

0.0

Correlation Coefficient

Amazon  DXC Technology

Pay attention - limited upside

The 3 months correlation between Amazon and DXC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and DXC Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Amazon 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 Amazon Inc are associated (or correlated) with DXC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXC Technology has no effect on the direction of Amazon i.e., Amazon and DXC Technology go up and down completely randomly.

Pair Corralation between Amazon and DXC Technology

If you would invest  345,257  in Amazon Inc on September 4, 2024 and sell it today you would earn a total of  84,684  from holding Amazon Inc or generate 24.53% return on investment over 90 days.

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

Amazon Inc  vs.  DXC Technology

Amazon Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Amazon showed solid returns over the last few months and may actually be approaching a breakup point.

DXC Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DXC Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, DXC Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amazon and DXC Technology

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

The idea behind Amazon Inc and DXC Technology 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.