Correlation Between Truist Financial and DXC Technology

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

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

Diversification Opportunities for Truist Financial and DXC Technology

0.76

Correlation Coefficient

Truist Financial  DXC Technology

Poor diversification

The 3 months correlation between Truist and DXC is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and DXC Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Truist Financial 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 Truist Financial 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 Truist Financial i.e., Truist Financial and DXC Technology go up and down completely randomly.

Pair Corralation between Truist Financial and DXC Technology

Assuming the 90 days trading horizon Truist Financial is expected to generate 1.48 times less return on investment than DXC Technology. But when comparing it to its historical volatility, Truist Financial is 2.08 times less risky than DXC Technology. It trades about 0.18 of its potential returns per unit of risk. DXC Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,679  in DXC Technology on October 8, 2024 and sell it today you would earn a total of  2,761  from holding DXC Technology or generate 25.85% return on investment over 90 days.

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

Truist Financial  vs.  DXC Technology

Truist Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Truist Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

DXC Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DXC Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Truist Financial and DXC Technology

The main advantage of trading using opposite Truist Financial and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial 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 Truist Financial 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.