Correlation Between American Homes and DXC Technology
Can any of the company-specific risk be diversified away by investing in both American Homes 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 American Homes and DXC Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and DXC Technology Co, you can compare the effects of market volatilities on American Homes 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 American Homes with a short position of DXC Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and DXC Technology.
Diversification Opportunities for American Homes and DXC Technology
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and DXC is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and American Homes 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 American Homes 4 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 American Homes i.e., American Homes and DXC Technology go up and down completely randomly.
Pair Corralation between American Homes and DXC Technology
Assuming the 90 days trading horizon American Homes is expected to generate 102.45 times less return on investment than DXC Technology. But when comparing it to its historical volatility, American Homes 4 is 2.32 times less risky than DXC Technology. It trades about 0.0 of its potential returns per unit of risk. DXC Technology Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,991 in DXC Technology Co on September 19, 2024 and sell it today you would earn a total of 139.00 from holding DXC Technology Co or generate 6.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Homes 4 vs. DXC Technology Co
Performance |
| Timeline |
| American Homes 4 |
| DXC Technology |
American Homes and DXC Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and DXC Technology
The main advantage of trading using opposite American Homes and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes 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.| American Homes vs. Samsung Electronics Co | American Homes vs. Samsung Electronics Co | American Homes vs. Hyundai Motor | American Homes vs. Reliance Industries Ltd |
| DXC Technology vs. Samsung Electronics Co | DXC Technology vs. Samsung Electronics Co | DXC Technology vs. Hyundai Motor | DXC Technology vs. Reliance Industries Ltd |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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