Correlation Between BTU Metals and Rackspace Technology

Can any of the company-specific risk be diversified away by investing in both BTU Metals and Rackspace Technology 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 BTU Metals and Rackspace Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for BTU Metals and Rackspace Technology

0.31

Correlation Coefficient

BTU Metals  Rackspace Technology

Weak diversification

The 3 months correlation between BTU and Rackspace is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and Rackspace Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackspace Technology and BTU Metals 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 BTU Metals Corp are associated (or correlated) with Rackspace Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rackspace Technology has no effect on the direction of BTU Metals i.e., BTU Metals and Rackspace Technology go up and down completely randomly.

Pair Corralation between BTU Metals and Rackspace Technology

If you would invest  227.00  in Rackspace Technology on October 27, 2024 and sell it today you would earn a total of  40.00  from holding Rackspace Technology or generate 17.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

BTU Metals Corp  vs.  Rackspace Technology

BTU Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BTU Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, BTU Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Rackspace Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rackspace Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rackspace Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BTU Metals and Rackspace Technology

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

The idea behind BTU Metals Corp and Rackspace Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.