Correlation Between RCI Hospitality and Rackspace Technology

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

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

Diversification Opportunities for RCI Hospitality and Rackspace Technology

-0.37

Correlation Coefficient

RCI Hospitality  Rackspace Technology

Very good diversification

The 3 months correlation between RCI and Rackspace is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Rackspace Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackspace Technology and RCI Hospitality 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 RCI Hospitality Holdings 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 RCI Hospitality i.e., RCI Hospitality and Rackspace Technology go up and down completely randomly.

Pair Corralation between RCI Hospitality and Rackspace Technology

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 0.92 times more return on investment than Rackspace Technology. However, RCI Hospitality Holdings is 1.09 times less risky than Rackspace Technology. It trades about 0.23 of its potential returns per unit of risk. Rackspace Technology is currently generating about -0.18 per unit of risk. If you would invest  5,062  in RCI Hospitality Holdings on October 4, 2024 and sell it today you would earn a total of  685.00  from holding RCI Hospitality Holdings or generate 13.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

RCI Hospitality Holdings  vs.  Rackspace Technology

RCI Hospitality Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, RCI Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady 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 RCI Hospitality and Rackspace Technology

The main advantage of trading using opposite RCI Hospitality and Rackspace Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality 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 RCI Hospitality Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.