Coaxial wire-fed powder-fed laser-directed energy deposition (CWP-DED) is an additive manufacturing (AM) process uniquely suited for dissimilar metal components that offer the high deposition rates of wire-based laser directed energy deposition (DED) and the high resolution of powder-based DED. The high thermal gradients during rapid heating and cooling cycles found with CWP-DED processing cause residual stress, leading to reductions in mechanical strength and geometrical accuracy of fabricated components. In the present work, a parametric study is done on Inconel 625 and GRCop-42 to correlate residual stress to material processing to gain a fundamental understanding of the dissimilar metal produced with CWP-DED processing. CWP-DED processed dissimilar metal material consisting of 30 wt% GRCop-42 powder and 70 wt% Inconel 625 wire is deposited and compared with arc melted samples through x-ray diffraction (XRD) residual stress analyses. It is found that processing parameters can greatly impact the resulting homogeneity of the printed material, which significantly impacts residual stress. Through this work, an approach to measuring residual stress through XRD is established and validated for the CWP-DED process as a first step towards understanding process-induced residual stress in dissimilar metal AM.