Correlation Between Science Applications and Xerox Corp
Can any of the company-specific risk be diversified away by investing in both Science Applications 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 Science Applications and Xerox Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Applications International and Xerox Corp, you can compare the effects of market volatilities on Science Applications 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 Science Applications with a short position of Xerox Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and Xerox Corp.
Diversification Opportunities for Science Applications and Xerox Corp
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Science and Xerox is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and Xerox Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xerox Corp and Science Applications 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 Science Applications International 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 Science Applications i.e., Science Applications and Xerox Corp go up and down completely randomly.
Pair Corralation between Science Applications and Xerox Corp
Given the investment horizon of 90 days Science Applications International is expected to generate 0.51 times more return on investment than Xerox Corp. However, Science Applications International is 1.95 times less risky than Xerox Corp. It trades about 0.05 of its potential returns per unit of risk. Xerox Corp is currently generating about -0.34 per unit of risk. If you would invest 12,708 in Science Applications International on January 26, 2024 and sell it today you would earn a total of 139.00 from holding Science Applications International or generate 1.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Science Applications Internati vs. Xerox Corp
Performance |
Timeline |
Science Applications |
Xerox Corp |
Science Applications and Xerox Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Science Applications and Xerox Corp
The main advantage of trading using opposite Science Applications and Xerox Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications 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.Science Applications vs. Infosys Ltd ADR | Science Applications vs. Cognizant Technology Solutions | Science Applications vs. Fidelity National Information | Science Applications vs. Jack Henry Associates |
Xerox Corp vs. Infosys Ltd ADR | Xerox Corp vs. Cognizant Technology Solutions | Xerox Corp vs. Fidelity National Information | Xerox Corp vs. Jack Henry Associates |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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