Correlation Between Rackspace Technology and BANCO

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

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

Diversification Opportunities for Rackspace Technology and BANCO

0.37

Correlation Coefficient

Rackspace Technology  BANCO

Weak diversification

The 3 months correlation between Rackspace and BANCO is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Rackspace Technology and BANCO SANTANDER SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANCO SANTANDER SA 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 BANCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANCO SANTANDER SA has no effect on the direction of Rackspace Technology i.e., Rackspace Technology and BANCO go up and down completely randomly.

Pair Corralation between Rackspace Technology and BANCO

Considering the 90-day investment horizon Rackspace Technology is expected to generate 4.84 times more return on investment than BANCO. However, Rackspace Technology is 4.84 times more volatile than BANCO SANTANDER SA. It trades about 0.01 of its potential returns per unit of risk. BANCO SANTANDER SA is currently generating about -0.14 per unit of risk. If you would invest  249.00  in Rackspace Technology on October 25, 2024 and sell it today you would lose (7.00) from holding Rackspace Technology or give up 2.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Rackspace Technology  vs.  BANCO SANTANDER SA

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 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.

BANCO SANTANDER SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANCO SANTANDER SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for BANCO SANTANDER SA investors.

Pair Trading with Rackspace Technology and BANCO

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

The idea behind Rackspace Technology and BANCO SANTANDER SA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.