Correlation Between DXC Technology and Barclays PLC

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

By analyzing existing cross correlation between DXC Technology and Barclays PLC, you can compare the effects of market volatilities on DXC Technology and Barclays PLC 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 Barclays PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and Barclays PLC.

Diversification Opportunities for DXC Technology and Barclays PLC

0.23

Correlation Coefficient

DXC Technology  Barclays PLC

Modest diversification

The 3 months correlation between DXC and Barclays is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology and Barclays PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC 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 are associated (or correlated) with Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC has no effect on the direction of DXC Technology i.e., DXC Technology and Barclays PLC go up and down completely randomly.

Pair Corralation between DXC Technology and Barclays PLC

Assuming the 90 days trading horizon DXC Technology is expected to generate 104.07 times less return on investment than Barclays PLC. But when comparing it to its historical volatility, DXC Technology is 93.76 times less risky than Barclays PLC. It trades about 0.13 of its potential returns per unit of risk. Barclays PLC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  13,288  in Barclays PLC on February 17, 2024 and sell it today you would earn a total of  3,909  from holding Barclays PLC or generate 29.42% return on investment over 90 days.

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

DXC Technology  vs.  Barclays PLC

DXC Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, DXC Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Barclays PLC

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Barclays PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DXC Technology and Barclays PLC

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

The idea behind DXC Technology and Barclays PLC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.