Correlation Between DXC Technology and Indie Semiconductor

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

Diversification Opportunities for DXC Technology and Indie Semiconductor

0.61

Correlation Coefficient

DXC Technology  Indie Semiconductor

Poor diversification

The 3 months correlation between DXC and Indie is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and indie Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on indie Semiconductor 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 Indie Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of indie Semiconductor has no effect on the direction of DXC Technology i.e., DXC Technology and Indie Semiconductor go up and down completely randomly.

Pair Corralation between DXC Technology and Indie Semiconductor

Considering the 90-day investment horizon DXC Technology is expected to generate 4.36 times less return on investment than Indie Semiconductor. But when comparing it to its historical volatility, DXC Technology Co is 3.71 times less risky than Indie Semiconductor. It trades about 0.07 of its potential returns per unit of risk. indie Semiconductor is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  378.00  in indie Semiconductor on August 31, 2024 and sell it today you would earn a total of  125.00  from holding indie Semiconductor or generate 33.07% return on investment over 90 days.

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

DXC Technology Co  vs.  indie Semiconductor

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 rather unsteady basic indicators, DXC Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

indie Semiconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in indie Semiconductor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Indie Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DXC Technology and Indie Semiconductor

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

The idea behind DXC Technology Co and indie Semiconductor 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.