Correlation Between Kyndryl Holdings and DXC Technology

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

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

Diversification Opportunities for Kyndryl Holdings and DXC Technology

-0.16

Correlation Coefficient

Kyndryl Holdings  DXC Technology

Good diversification

The 3 months correlation between Kyndryl and DXC is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kyndryl Holdings and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Kyndryl Holdings 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 Kyndryl Holdings 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 Kyndryl Holdings i.e., Kyndryl Holdings and DXC Technology go up and down completely randomly.

Pair Corralation between Kyndryl Holdings and DXC Technology

Allowing for the 90-day total investment horizon Kyndryl Holdings is expected to generate 1.16 times more return on investment than DXC Technology. However, Kyndryl Holdings is 1.16 times more volatile than DXC Technology Co. It trades about -0.01 of its potential returns per unit of risk. DXC Technology Co is currently generating about -0.26 per unit of risk. If you would invest  3,842  in Kyndryl Holdings on November 29, 2024 and sell it today you would lose (69.00) from holding Kyndryl Holdings or give up 1.8% of portfolio value over 90 days.

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

Kyndryl Holdings  vs.  DXC Technology Co

Kyndryl Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kyndryl Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Kyndryl Holdings may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kyndryl Holdings and DXC Technology

The main advantage of trading using opposite Kyndryl Holdings and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kyndryl Holdings 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 Kyndryl Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.