Correlation Between DPCM Capital and Xerox Corp

Can any of the company-specific risk be diversified away by investing in both DPCM Capital 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 DPCM Capital and Xerox Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for DPCM Capital and Xerox Corp

0.38

Correlation Coefficient

DPCM Capital  Xerox Corp

Weak diversification

The 3 months correlation between DPCM and Xerox is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding DPCM Capital and Xerox Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xerox Corp and DPCM Capital 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 DPCM Capital 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 DPCM Capital i.e., DPCM Capital and Xerox Corp go up and down completely randomly.

Pair Corralation between DPCM Capital and Xerox Corp

Given the investment horizon of 90 days DPCM Capital is expected to under-perform the Xerox Corp. In addition to that, DPCM Capital is 1.33 times more volatile than Xerox Corp. It trades about -0.29 of its total potential returns per unit of risk. Xerox Corp is currently generating about -0.38 per unit of volatility. If you would invest  1,685  in Xerox Corp on February 12, 2024 and sell it today you would lose (331.00) from holding Xerox Corp or give up 19.64% of portfolio value over 90 days.

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

DPCM Capital  vs.  Xerox Corp

DPCM Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DPCM Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, DPCM Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xerox Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xerox Corp 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 fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with DPCM Capital and Xerox Corp

The main advantage of trading using opposite DPCM Capital and Xerox Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DPCM Capital 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 DPCM Capital 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 Commodity Directory module to find actively traded commodities issued by global exchanges.