Correlation Between Heritage Financial and DXC Technology

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

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

Diversification Opportunities for Heritage Financial and DXC Technology

0.77

Correlation Coefficient

Heritage Financial  DXC Technology

Poor diversification

The 3 months correlation between Heritage and DXC is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Heritage Financial 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 Heritage Financial 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 Heritage Financial i.e., Heritage Financial and DXC Technology go up and down completely randomly.

Pair Corralation between Heritage Financial and DXC Technology

Given the investment horizon of 90 days Heritage Financial is expected to generate 1.1 times more return on investment than DXC Technology. However, Heritage Financial is 1.1 times more volatile than DXC Technology Co. It trades about 0.1 of its potential returns per unit of risk. DXC Technology Co is currently generating about 0.01 per unit of risk. If you would invest  2,116  in Heritage Financial on September 27, 2024 and sell it today you would earn a total of  329.00  from holding Heritage Financial or generate 15.55% return on investment over 90 days.

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

Heritage Financial  vs.  DXC Technology Co

Heritage Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Heritage Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

DXC Technology

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days DXC Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Heritage Financial and DXC Technology

The main advantage of trading using opposite Heritage Financial and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Financial 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 Heritage Financial and DXC Technology Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.