Optical direct current (DC) transformer has become a hot spot of research with its high accuracy, wide bandwidth, and high voltage isolation characteristics, but has the technical difficulties of low signal-to-noise ratio of ODCT signal and poor temperature stability. For this reason, the study proposes a new type of optical DC transformer integrating material science and signal processing. The study introduces an improved terbium gallium garnet crystal sensing unit material and a signal processing algorithm with a plus-window dual correlation detection algorithm, and constructs an optical DC transformer model. Simulation results show that the temperature compensation method can effectively weaken the influence of temperature change on the measurement accuracy under both warming and cooling conditions, and higher accuracy can be obtained by using the whole period window for measurement. The system applying terbium gallium garnet crystals helps to enhance the measuring system's output signal-to-noise ratio and sensitivity. Terbium gallium garnet crystals as a sensing material can further decrease the measuring error compared with other magneto-optical glasses. Taken together, DC measurement system using terbium gallium garnet crystals and dual correlation detecting algorithm can control the error to about 0.3 s. Simulation experiments verify the validity and feasibility of the research methodology, which can guide the research and application of optical DC transformers in the future.