Correlation Between Better World and Rackspace Technology

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

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

Diversification Opportunities for Better World and Rackspace Technology

0.53

Correlation Coefficient

Better World  Rackspace Technology

Very weak diversification

The 3 months correlation between Better and Rackspace is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Better World Acquisition and Rackspace Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackspace Technology and Better World 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 Better World Acquisition 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 Better World i.e., Better World and Rackspace Technology go up and down completely randomly.

Pair Corralation between Better World and Rackspace Technology

If you would invest  1,002  in Better World Acquisition on September 28, 2024 and sell it today you would earn a total of  0.00  from holding Better World Acquisition or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

Better World Acquisition  vs.  Rackspace Technology

Better World Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better World Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Better World is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Rackspace Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rackspace Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rackspace Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Better World and Rackspace Technology

The main advantage of trading using opposite Better World and Rackspace Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Better World 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 Better World Acquisition 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.