Correlation Between JD Sports and Rackspace Technology
Can any of the company-specific risk be diversified away by investing in both JD Sports 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 JD Sports and Rackspace Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Sports Fashion and Rackspace Technology, you can compare the effects of market volatilities on JD Sports 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 JD Sports with a short position of Rackspace Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Rackspace Technology.
Diversification Opportunities for JD Sports and Rackspace Technology
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between JDDSF and Rackspace is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Rackspace Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackspace Technology and JD Sports 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 JD Sports Fashion 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 JD Sports i.e., JD Sports and Rackspace Technology go up and down completely randomly.
Pair Corralation between JD Sports and Rackspace Technology
Assuming the 90 days horizon JD Sports Fashion is expected to generate 0.77 times more return on investment than Rackspace Technology. However, JD Sports Fashion is 1.3 times less risky than Rackspace Technology. It trades about 0.03 of its potential returns per unit of risk. Rackspace Technology is currently generating about 0.02 per unit of risk. If you would invest 109.00 in JD Sports Fashion on October 10, 2024 and sell it today you would earn a total of 37.00 from holding JD Sports Fashion or generate 33.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
JD Sports Fashion vs. Rackspace Technology
Performance |
Timeline |
JD Sports Fashion |
Rackspace Technology |
JD Sports and Rackspace Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with JD Sports and Rackspace Technology
The main advantage of trading using opposite JD Sports and Rackspace Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports 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 JD Sports Fashion 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.Rackspace Technology vs. GigaCloud Technology Class | Rackspace Technology vs. Alarum Technologies | Rackspace Technology vs. Stem Inc | Rackspace Technology vs. Pagaya Technologies |
Check out your portfolio center.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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