Correlation Between DXC Technology and State Street

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Can any of the company-specific risk be diversified away by investing in both DXC Technology and State Street 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 State Street 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 State Street, you can compare the effects of market volatilities on DXC Technology and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and State Street.

Diversification Opportunities for DXC Technology and State Street

DXCStateDiversified AwayDXCStateDiversified Away100%
0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between DXC and State is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of DXC Technology i.e., DXC Technology and State Street go up and down completely randomly.

Pair Corralation between DXC Technology and State Street

Assuming the 90 days trading horizon DXC Technology is expected to generate 2.85 times less return on investment than State Street. In addition to that, DXC Technology is 1.57 times more volatile than State Street. It trades about 0.03 of its total potential returns per unit of risk. State Street is currently generating about 0.13 per unit of volatility. If you would invest  7,754  in State Street on September 28, 2024 and sell it today you would earn a total of  1,670  from holding State Street or generate 21.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

DXC Technology Co  vs.  State Street

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -505101520
JavaScript chart by amCharts 3.21.152XT ZYA
       Timeline  
DXC Technology 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DXC Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1818.51919.52020.52121.5
State Street 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Street reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec80859095

DXC Technology and State Street Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.95-5.95-3.96-1.960.02.04.046.078.11 0.050.100.150.20
JavaScript chart by amCharts 3.21.152XT ZYA
       Returns  

Pair Trading with DXC Technology and State Street

The main advantage of trading using opposite DXC Technology and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.
The idea behind DXC Technology Co and State Street 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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