Correlation Between DXC Technology and International Business

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

Diversification Opportunities for DXC Technology and International Business

0.21

Correlation Coefficient

DXC Technology  International Business

Modest diversification

The 3 months correlation between DXC and International is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of DXC Technology i.e., DXC Technology and International Business go up and down completely randomly.

Pair Corralation between DXC Technology and International Business

Considering the 90-day investment horizon DXC Technology Co is expected to generate 1.59 times more return on investment than International Business. However, DXC Technology is 1.59 times more volatile than International Business Machines. It trades about 0.03 of its potential returns per unit of risk. International Business Machines is currently generating about 0.02 per unit of risk. If you would invest  2,031  in DXC Technology Co on September 26, 2024 and sell it today you would earn a total of  63.00  from holding DXC Technology Co or generate 3.1% return on investment over 90 days.

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

DXC Technology Co  vs.  International Business Machine

DXC Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, DXC Technology is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

International Business

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with DXC Technology and International Business

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

The idea behind DXC Technology Co and International Business Machines 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.