Correlation Between DXC Technology and Xerox Corp

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

Diversification Opportunities for DXC Technology and Xerox Corp

0.45

Correlation Coefficient

DXC Technology  Xerox Corp

Very weak diversification

The 3 months correlation between DXC and Xerox is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and Xerox Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xerox Corp 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 Xerox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xerox Corp has no effect on the direction of DXC Technology i.e., DXC Technology and Xerox Corp go up and down completely randomly.

Pair Corralation between DXC Technology and Xerox Corp

Considering the 90-day investment horizon DXC Technology Co is expected to under-perform the Xerox Corp. But the stock apears to be less risky and, when comparing its historical volatility, DXC Technology Co is 1.73 times less risky than Xerox Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Xerox Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  414.00  in Xerox Corp on April 24, 2025 and sell it today you would earn a total of  169.00  from holding Xerox Corp or generate 40.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

DXC Technology Co  vs.  Xerox Corp

DXC Technology

Risk-Adjusted Performance

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 rather sound basic indicators, DXC Technology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Xerox Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xerox Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Xerox Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DXC Technology and Xerox Corp

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

The idea behind DXC Technology Co and Xerox Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.