Correlation Between DXC Technology and Formula Systems

Can any of the company-specific risk be diversified away by investing in both DXC Technology and Formula Systems 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 Formula Systems 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 Formula Systems 1985, you can compare the effects of market volatilities on DXC Technology and Formula Systems 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 Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and Formula Systems.

Diversification Opportunities for DXC Technology and Formula Systems

-0.57

Correlation Coefficient

DXC Technology  Formula Systems

Excellent diversification

The 3 months correlation between DXC and Formula is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 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 Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of DXC Technology i.e., DXC Technology and Formula Systems go up and down completely randomly.

Pair Corralation between DXC Technology and Formula Systems

Considering the 90-day investment horizon DXC Technology Co is expected to under-perform the Formula Systems. But the stock apears to be less risky and, when comparing its historical volatility, DXC Technology Co is 1.65 times less risky than Formula Systems. The stock trades about -0.14 of its potential returns per unit of risk. The Formula Systems 1985 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,573  in Formula Systems 1985 on May 10, 2025 and sell it today you would earn a total of  1,192  from holding Formula Systems 1985 or generate 12.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

DXC Technology Co  vs.  Formula Systems 1985

DXC Technology

Risk-Adjusted Performance

Weakest

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Formula Systems 1985

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Formula Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DXC Technology and Formula Systems

The main advantage of trading using opposite DXC Technology and Formula Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology position performs unexpectedly, Formula Systems 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 Formula Systems will offset losses from the drop in Formula Systems' long position.

The idea behind DXC Technology Co and Formula Systems 1985 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.