Correlation Between Rackspace Technology and Ambev SA

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

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

Diversification Opportunities for Rackspace Technology and Ambev SA

-0.01

Correlation Coefficient

Rackspace Technology  Ambev SA

Good diversification

The 3 months correlation between Rackspace and Ambev is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Rackspace Technology and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR and Rackspace Technology 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 Rackspace Technology are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of Rackspace Technology i.e., Rackspace Technology and Ambev SA go up and down completely randomly.

Pair Corralation between Rackspace Technology and Ambev SA

Considering the 90-day investment horizon Rackspace Technology is expected to generate 3.7 times more return on investment than Ambev SA. However, Rackspace Technology is 3.7 times more volatile than Ambev SA ADR. It trades about 0.03 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.01 per unit of risk. If you would invest  214.00  in Rackspace Technology on December 4, 2024 and sell it today you would earn a total of  22.00  from holding Rackspace Technology or generate 10.28% return on investment over 90 days.

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

Rackspace Technology  vs.  Ambev SA ADR

Rackspace Technology

Risk-Adjusted Performance

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.

Ambev SA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Rackspace Technology and Ambev SA

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

The idea behind Rackspace Technology and Ambev SA ADR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.