Correlation Between DXC Technology and Bath Body

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

Diversification Opportunities for DXC Technology and Bath Body

0.3

Correlation Coefficient

DXC Technology  Bath Body

Weak diversification

The 3 months correlation between DXC and Bath is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works 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 Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of DXC Technology i.e., DXC Technology and Bath Body go up and down completely randomly.

Pair Corralation between DXC Technology and Bath Body

Assuming the 90 days trading horizon DXC Technology Co is expected to under-perform the Bath Body. But the stock apears to be less risky and, when comparing its historical volatility, DXC Technology Co is 1.48 times less risky than Bath Body. The stock trades about -0.49 of its potential returns per unit of risk. The Bath Body Works is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  3,931  in Bath Body Works on October 8, 2024 and sell it today you would lose (218.00) from holding Bath Body Works or give up 5.55% of portfolio value over 90 days.

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

DXC Technology Co  vs.  Bath Body Works

DXC Technology

Risk-Adjusted Performance

0 of 100

Very 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 comparatively stable basic indicators, DXC Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bath Body Works

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bath Body Works are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bath Body unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DXC Technology and Bath Body

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

The idea behind DXC Technology Co and Bath Body Works 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.