Correlation Between ScanSource and Rackspace Technology

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

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

Diversification Opportunities for ScanSource and Rackspace Technology

0.41

Correlation Coefficient

ScanSource  Rackspace Technology

Very weak diversification

The 3 months correlation between ScanSource and Rackspace is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Rackspace Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackspace Technology and ScanSource 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 ScanSource 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 ScanSource i.e., ScanSource and Rackspace Technology go up and down completely randomly.

Pair Corralation between ScanSource and Rackspace Technology

Given the investment horizon of 90 days ScanSource is expected to generate 0.58 times more return on investment than Rackspace Technology. However, ScanSource is 1.74 times less risky than Rackspace Technology. It trades about 0.08 of its potential returns per unit of risk. Rackspace Technology is currently generating about 0.03 per unit of risk. If you would invest  4,708  in ScanSource on September 15, 2024 and sell it today you would earn a total of  548.00  from holding ScanSource or generate 11.64% return on investment over 90 days.

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

ScanSource  vs.  Rackspace Technology

ScanSource

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ScanSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rackspace Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rackspace Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rackspace Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ScanSource and Rackspace Technology

The main advantage of trading using opposite ScanSource and Rackspace Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource 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 ScanSource 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.