Correlation Between DXC Technology and Morgan Stanley

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

Diversification Opportunities for DXC Technology and Morgan Stanley

0.79

Correlation Coefficient

DXC Technology  Morgan Stanley

Poor diversification

The 3 months correlation between DXC and Morgan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of DXC Technology i.e., DXC Technology and Morgan Stanley go up and down completely randomly.

Pair Corralation between DXC Technology and Morgan Stanley

Assuming the 90 days trading horizon DXC Technology Co is expected to under-perform the Morgan Stanley. In addition to that, DXC Technology is 1.5 times more volatile than Morgan Stanley. It trades about -0.29 of its total potential returns per unit of risk. Morgan Stanley is currently generating about 0.03 per unit of volatility. If you would invest  12,182  in Morgan Stanley on October 10, 2024 and sell it today you would earn a total of  78.00  from holding Morgan Stanley or generate 0.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

DXC Technology Co  vs.  Morgan Stanley

DXC Technology

Risk-Adjusted Performance

5 of 100

Insignificant

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 comparatively fragile basic indicators, DXC Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Morgan Stanley

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DXC Technology and Morgan Stanley

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

The idea behind DXC Technology Co and Morgan Stanley 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.