Correlation Between Xerox Corp and Science Applications

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

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

Diversification Opportunities for Xerox Corp and Science Applications

0.25

Correlation Coefficient

Xerox Corp  Science Applications

Modest diversification

The 3 months correlation between Xerox and Science is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Xerox Corp and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications and Xerox Corp 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 Xerox Corp are associated (or correlated) with Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Xerox Corp i.e., Xerox Corp and Science Applications go up and down completely randomly.

Pair Corralation between Xerox Corp and Science Applications

Considering the 90-day investment horizon Xerox Corp is expected to generate 4.73 times less return on investment than Science Applications. In addition to that, Xerox Corp is 1.77 times more volatile than Science Applications International. It trades about 0.01 of its total potential returns per unit of risk. Science Applications International is currently generating about 0.07 per unit of volatility. If you would invest  8,134  in Science Applications International on January 26, 2024 and sell it today you would earn a total of  4,713  from holding Science Applications International or generate 57.94% return on investment over 90 days.

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

Xerox Corp  vs.  Science Applications Internati

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 conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Science Applications is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Xerox Corp and Science Applications

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

The idea behind Xerox Corp and Science Applications International 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.