Correlation Between International Business and DXC Technology

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

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

Diversification Opportunities for International Business and DXC Technology

0.15

Correlation Coefficient

International Business  DXC Technology

Average diversification

The 3 months correlation between International and DXC is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and International Business 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 International Business Machines 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 International Business i.e., International Business and DXC Technology go up and down completely randomly.

Pair Corralation between International Business and DXC Technology

Considering the 90-day investment horizon International Business Machines is expected to generate 1.09 times more return on investment than DXC Technology. However, International Business is 1.09 times more volatile than DXC Technology Co. It trades about 0.17 of its potential returns per unit of risk. DXC Technology Co is currently generating about -0.02 per unit of risk. If you would invest  21,318  in International Business Machines on November 20, 2024 and sell it today you would earn a total of  4,810  from holding International Business Machines or generate 22.56% return on investment over 90 days.

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

International Business Machine  vs.  DXC Technology Co

International Business

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.

DXC Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days DXC Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, DXC Technology is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with International Business and DXC Technology

The main advantage of trading using opposite International Business and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines and DXC Technology Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.