Correlation Between DXC Technology and China Merchants

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

Diversification Opportunities for DXC Technology and China Merchants

-0.54

Correlation Coefficient

DXC Technology  China Merchants

Excellent diversification

The 3 months correlation between DXC and China is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and China Merchants Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Port 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Port has no effect on the direction of DXC Technology i.e., DXC Technology and China Merchants go up and down completely randomly.

Pair Corralation between DXC Technology and China Merchants

Assuming the 90 days trading horizon DXC Technology Co is expected to under-perform the China Merchants. But the stock apears to be less risky and, when comparing its historical volatility, DXC Technology Co is 1.26 times less risky than China Merchants. The stock trades about -0.01 of its potential returns per unit of risk. The China Merchants Port is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  157.00  in China Merchants Port on October 23, 2024 and sell it today you would earn a total of  0.00  from holding China Merchants Port or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

DXC Technology Co  vs.  China Merchants Port

DXC Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DXC Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Merchants Port

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Merchants Port has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Merchants is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DXC Technology and China Merchants

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

The idea behind DXC Technology Co and China Merchants Port 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.