Correlation Between Altria and DXC Technology
Can any of the company-specific risk be diversified away by investing in both Altria 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 Altria and DXC Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and DXC Technology, you can compare the effects of market volatilities on Altria 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 Altria with a short position of DXC Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and DXC Technology.
Diversification Opportunities for Altria and DXC Technology
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Altria and DXC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and DXC Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Altria 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 Altria Group 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 Altria i.e., Altria and DXC Technology go up and down completely randomly.
Pair Corralation between Altria and DXC Technology
Assuming the 90 days trading horizon Altria is expected to generate 10.39 times less return on investment than DXC Technology. But when comparing it to its historical volatility, Altria Group is 1.56 times less risky than DXC Technology. It trades about 0.01 of its potential returns per unit of risk. DXC Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 10,679 in DXC Technology on November 6, 2024 and sell it today you would earn a total of 1,633 from holding DXC Technology or generate 15.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Altria Group vs. DXC Technology
Performance |
| Timeline |
| Altria Group |
| DXC Technology |
Altria and DXC Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altria and DXC Technology
The main advantage of trading using opposite Altria and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria 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.| Altria vs. British American Tobacco | Altria vs. Karsten SA | Altria vs. Ameriprise Financial | Altria vs. LPL Financial Holdings |
| DXC Technology vs. Charter Communications | DXC Technology vs. Metalrgica Riosulense SA | DXC Technology vs. United States Steel | DXC Technology vs. Melco Resorts Entertainment |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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