An X-masking scheme prevents unknown (X) values from shifting into an output response compactor, whereas an X-canceling MISR methodology allows X's to enter the compactor, but then cancels them out through selective XORing. However, both approaches require significantly high volume of the control bits to remove X values to generate X-free output signatures. This paper proposes a method to reduce the control bit overhead by combining X-masking and X-canceling methodologies and exploiting the fact that unknown values tend to have high correlation in the scan cells. In this paper, correlation is considered across whole patterns in order to enhance reuse of control bits. The proposed hybrid method of X-canceling and X-masking reduces test time without losing fault coverage. The experimental results show that the proposed method significantly reduces control bits and test time compared to a conventional X-canceling MISR methodology.