Correlation Between DXC Technology and BHP

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

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

Diversification Opportunities for DXC Technology and BHP

0.0

Correlation Coefficient

DXC Technology  BHP

Pay attention - limited upside

The 3 months correlation between DXC and BHP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group 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 BHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group has no effect on the direction of DXC Technology i.e., DXC Technology and BHP go up and down completely randomly.

Pair Corralation between DXC Technology and BHP

Assuming the 90 days trading horizon DXC Technology is expected to generate 50.73 times less return on investment than BHP. But when comparing it to its historical volatility, DXC Technology is 76.95 times less risky than BHP. It trades about 0.06 of its potential returns per unit of risk. BHP Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  101,555  in BHP Group on October 22, 2024 and sell it today you would earn a total of  12,365  from holding BHP Group or generate 12.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DXC Technology  vs.  BHP Group

DXC Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DXC Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, DXC Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BHP Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, BHP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DXC Technology and BHP

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

The idea behind DXC Technology and BHP Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.