Correlation Between DXC Technology and CGI

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

Diversification Opportunities for DXC Technology and CGI

0.62

Correlation Coefficient

DXC Technology  CGI

Poor diversification

The 3 months correlation between DXC and CGI is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and CGI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGI Inc 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 CGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGI Inc has no effect on the direction of DXC Technology i.e., DXC Technology and CGI go up and down completely randomly.

Pair Corralation between DXC Technology and CGI

Considering the 90-day investment horizon DXC Technology Co is expected to under-perform the CGI. In addition to that, DXC Technology is 1.71 times more volatile than CGI Inc. It trades about -0.03 of its total potential returns per unit of risk. CGI Inc is currently generating about -0.04 per unit of volatility. If you would invest  10,293  in CGI Inc on February 14, 2024 and sell it today you would lose (123.00) from holding CGI Inc or give up 1.19% of portfolio value over 90 days.

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

DXC Technology Co  vs.  CGI Inc

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 latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CGI Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CGI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with DXC Technology and CGI

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

The idea behind DXC Technology Co and CGI Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.