Correlation Between Microsoft and DXC Technology

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

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

Diversification Opportunities for Microsoft and DXC Technology

0.88

Correlation Coefficient

Microsoft  DXC Technology

Very poor diversification

The 3 months correlation between Microsoft and DXC is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and DXC Technology go up and down completely randomly.

Pair Corralation between Microsoft and DXC Technology

Assuming the 90 days trading horizon Microsoft is expected to generate 0.84 times more return on investment than DXC Technology. However, Microsoft is 1.19 times less risky than DXC Technology. It trades about -0.14 of its potential returns per unit of risk. DXC Technology Co is currently generating about -0.13 per unit of risk. If you would invest  40,918  in Microsoft on December 30, 2024 and sell it today you would lose (5,988) from holding Microsoft or give up 14.63% of portfolio value over 90 days.

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

Microsoft  vs.  DXC Technology Co

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and DXC Technology

The main advantage of trading using opposite Microsoft and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..