Correlation Between Applied Materials and DXC Technology

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

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

Diversification Opportunities for Applied Materials and DXC Technology

-0.68

Correlation Coefficient

Applied Materials  DXC Technology

Excellent diversification

The 3 months correlation between Applied and DXC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and DXC Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Applied Materials 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 Applied Materials are associated (or correlated) with DXC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXC Technology has no effect on the direction of Applied Materials i.e., Applied Materials and DXC Technology go up and down completely randomly.

Pair Corralation between Applied Materials and DXC Technology

Assuming the 90 days trading horizon Applied Materials is expected to generate 1.35 times more return on investment than DXC Technology. However, Applied Materials is 1.35 times more volatile than DXC Technology. It trades about 0.15 of its potential returns per unit of risk. DXC Technology is currently generating about -0.21 per unit of risk. If you would invest  288,678  in Applied Materials on April 24, 2025 and sell it today you would earn a total of  58,191  from holding Applied Materials or generate 20.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Applied Materials  vs.  DXC Technology

Applied Materials

Risk-Adjusted Performance

Good

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

DXC Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days DXC Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Applied Materials and DXC Technology

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

The idea behind Applied Materials and DXC Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.