Correlation Between DXC Technology and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both DXC Technology and STMICROELECTRONICS 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 STMICROELECTRONICS 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 STMICROELECTRONICS, you can compare the effects of market volatilities on DXC Technology and STMICROELECTRONICS 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 STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and STMICROELECTRONICS.
Diversification Opportunities for DXC Technology and STMICROELECTRONICS
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between DXC and STMICROELECTRONICS is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of DXC Technology i.e., DXC Technology and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between DXC Technology and STMICROELECTRONICS
Assuming the 90 days trading horizon DXC Technology Co is expected to generate 1.2 times more return on investment than STMICROELECTRONICS. However, DXC Technology is 1.2 times more volatile than STMICROELECTRONICS. It trades about 0.0 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.06 per unit of risk. If you would invest 2,707 in DXC Technology Co on November 6, 2024 and sell it today you would lose (580.00) from holding DXC Technology Co or give up 21.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DXC Technology Co vs. STMICROELECTRONICS
Performance |
| Timeline |
| DXC Technology |
| STMICROELECTRONICS |
DXC Technology and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DXC Technology and STMICROELECTRONICS
The main advantage of trading using opposite DXC Technology and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.| DXC Technology vs. Arrow Electronics | DXC Technology vs. STORE ELECTRONIC | DXC Technology vs. BURLINGTON STORES | DXC Technology vs. PICKN PAY STORES |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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