Correlation Between DXC Technology and American Homes
Can any of the company-specific risk be diversified away by investing in both DXC Technology and American Homes 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 American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DXC Technology Co and American Homes 4, you can compare the effects of market volatilities on DXC Technology and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and American Homes.
Diversification Opportunities for DXC Technology and American Homes
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between DXC and American is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 Co are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of DXC Technology i.e., DXC Technology and American Homes go up and down completely randomly.
Pair Corralation between DXC Technology and American Homes
Assuming the 90 days trading horizon DXC Technology is expected to generate 1.01 times less return on investment than American Homes. In addition to that, DXC Technology is 1.89 times more volatile than American Homes 4. It trades about 0.03 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.05 per unit of volatility. If you would invest 3,117 in American Homes 4 on September 19, 2024 and sell it today you would earn a total of 545.00 from holding American Homes 4 or generate 17.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.93% |
| Values | Daily Returns |
DXC Technology Co vs. American Homes 4
Performance |
| Timeline |
| DXC Technology |
| American Homes 4 |
DXC Technology and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DXC Technology and American Homes
The main advantage of trading using opposite DXC Technology and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| DXC Technology vs. Samsung Electronics Co | DXC Technology vs. Samsung Electronics Co | DXC Technology vs. Hyundai Motor | DXC Technology vs. Reliance Industries Ltd |
| American Homes vs. Samsung Electronics Co | American Homes vs. Samsung Electronics Co | American Homes vs. Hyundai Motor | American Homes 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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