Correlation Between Align Technology and DXC Technology

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

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

Diversification Opportunities for Align Technology and DXC Technology

0.89

Correlation Coefficient

Align Technology  DXC Technology

Very poor diversification

The 3 months correlation between Align and DXC is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and DXC Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Align 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 Align Technology 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 Align Technology i.e., Align Technology and DXC Technology go up and down completely randomly.

Pair Corralation between Align Technology and DXC Technology

Assuming the 90 days trading horizon Align Technology is expected to under-perform the DXC Technology. In addition to that, Align Technology is 1.06 times more volatile than DXC Technology. It trades about -0.29 of its total potential returns per unit of risk. DXC Technology is currently generating about -0.21 per unit of volatility. If you would invest  13,440  in DXC Technology on December 23, 2024 and sell it today you would lose (2,682) from holding DXC Technology or give up 19.96% of portfolio value over 90 days.

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

Align Technology  vs.  DXC Technology

Align Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Align Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DXC Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days DXC Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Align Technology and DXC Technology

The main advantage of trading using opposite Align Technology and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology 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 Align Technology and DXC Technology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..