Correlation Between Rackspace Technology and Herc Holdings

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

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

Diversification Opportunities for Rackspace Technology and Herc Holdings

0.21

Correlation Coefficient

Rackspace Technology  Herc Holdings

Modest diversification

The 3 months correlation between Rackspace and Herc is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rackspace Technology and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings 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 Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Rackspace Technology i.e., Rackspace Technology and Herc Holdings go up and down completely randomly.

Pair Corralation between Rackspace Technology and Herc Holdings

Considering the 90-day investment horizon Rackspace Technology is expected to generate 2.12 times more return on investment than Herc Holdings. However, Rackspace Technology is 2.12 times more volatile than Herc Holdings. It trades about 0.02 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.04 per unit of risk. If you would invest  280.00  in Rackspace Technology on October 10, 2024 and sell it today you would lose (44.00) from holding Rackspace Technology or give up 15.71% of portfolio value over 90 days.

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

Rackspace Technology  vs.  Herc Holdings

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.

Herc Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rackspace Technology and Herc Holdings

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

The idea behind Rackspace Technology and Herc Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.