Correlation Between DXC Technology and Raytheon Technologies

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

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

Diversification Opportunities for DXC Technology and Raytheon Technologies

-0.72

Correlation Coefficient

DXC Technology  Raytheon Technologies

Pay attention - limited upside

The 3 months correlation between DXC and Raytheon is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of DXC Technology i.e., DXC Technology and Raytheon Technologies go up and down completely randomly.

Pair Corralation between DXC Technology and Raytheon Technologies

Assuming the 90 days trading horizon DXC Technology is expected to under-perform the Raytheon Technologies. In addition to that, DXC Technology is 1.16 times more volatile than Raytheon Technologies. It trades about -0.21 of its total potential returns per unit of risk. Raytheon Technologies is currently generating about 0.09 per unit of volatility. If you would invest  12,014  in Raytheon Technologies on December 25, 2024 and sell it today you would earn a total of  884.00  from holding Raytheon Technologies or generate 7.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

DXC Technology  vs.  Raytheon Technologies

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 uncertain 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.

Raytheon Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DXC Technology and Raytheon Technologies

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

The idea behind DXC Technology and Raytheon Technologies 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.