Correlation Between Lion One and Rackspace Technology

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

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

Diversification Opportunities for Lion One and Rackspace Technology

0.47

Correlation Coefficient

Lion One  Rackspace Technology

Very weak diversification

The 3 months correlation between Lion and Rackspace is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Rackspace Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackspace Technology and Lion One 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 Lion One Metals 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 Lion One i.e., Lion One and Rackspace Technology go up and down completely randomly.

Pair Corralation between Lion One and Rackspace Technology

Assuming the 90 days horizon Lion One Metals is expected to generate 1.55 times more return on investment than Rackspace Technology. However, Lion One is 1.55 times more volatile than Rackspace Technology. It trades about 0.14 of its potential returns per unit of risk. Rackspace Technology is currently generating about -0.14 per unit of risk. If you would invest  19.00  in Lion One Metals on October 12, 2024 and sell it today you would earn a total of  2.00  from holding Lion One Metals or generate 10.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Lion One Metals  vs.  Rackspace Technology

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Lion One and Rackspace Technology

The main advantage of trading using opposite Lion One and Rackspace Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One 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 Lion One Metals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.