Correlation Between DXC Technology and Microsoft

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

Diversification Opportunities for DXC Technology and Microsoft

0.57

Correlation Coefficient

DXC Technology  Microsoft

Very weak diversification

The 3 months correlation between DXC and Microsoft is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of DXC Technology i.e., DXC Technology and Microsoft go up and down completely randomly.

Pair Corralation between DXC Technology and Microsoft

Assuming the 90 days trading horizon DXC Technology Co is expected to under-perform the Microsoft. In addition to that, DXC Technology is 1.91 times more volatile than Microsoft. It trades about -0.01 of its total potential returns per unit of risk. Microsoft is currently generating about 0.1 per unit of volatility. If you would invest  21,808  in Microsoft on October 15, 2024 and sell it today you would earn a total of  19,377  from holding Microsoft or generate 88.85% return on investment over 90 days.

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

DXC Technology Co  vs.  Microsoft

DXC Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Microsoft

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DXC Technology and Microsoft

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

The idea behind DXC Technology Co and Microsoft 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .