Correlation Between Data Storage and DXC Technology

Can any of the company-specific risk be diversified away by investing in both Data Storage 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 Data Storage and DXC Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Data Storage Corp and DXC Technology Co, you can compare the effects of market volatilities on Data Storage 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 Data Storage with a short position of DXC Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data Storage and DXC Technology.

Diversification Opportunities for Data Storage and DXC Technology

-0.57

Correlation Coefficient

Data Storage  DXC Technology

Excellent diversification

The 3 months correlation between Data and DXC is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Data Storage Corp and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Data Storage 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 Data Storage Corp 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 Data Storage i.e., Data Storage and DXC Technology go up and down completely randomly.

Pair Corralation between Data Storage and DXC Technology

Given the investment horizon of 90 days Data Storage Corp is expected to under-perform the DXC Technology. In addition to that, Data Storage is 1.85 times more volatile than DXC Technology Co. It trades about -0.1 of its total potential returns per unit of risk. DXC Technology Co is currently generating about -0.09 per unit of volatility. If you would invest  2,121  in DXC Technology Co on January 28, 2024 and sell it today you would lose (113.00) from holding DXC Technology Co or give up 5.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Data Storage Corp  vs.  DXC Technology Co

Data Storage Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Data Storage Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Data Storage unveiled solid returns over the last few months and may actually be approaching a breakup point.

DXC Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DXC Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Data Storage and DXC Technology

The main advantage of trading using opposite Data Storage and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data Storage 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.

The idea behind Data Storage Corp and DXC Technology Co 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.