Correlation Between Sun Life and Rackspace Technology

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Can any of the company-specific risk be diversified away by investing in both Sun Life 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 Sun Life and Rackspace Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Life Financial and Rackspace Technology, you can compare the effects of market volatilities on Sun Life 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 Sun Life with a short position of Rackspace Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Rackspace Technology.

Diversification Opportunities for Sun Life and Rackspace Technology

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Sun and Rackspace is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Rackspace Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackspace Technology and Sun Life 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 Sun Life Financial 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 Sun Life i.e., Sun Life and Rackspace Technology go up and down completely randomly.

Pair Corralation between Sun Life and Rackspace Technology

Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.2 times more return on investment than Rackspace Technology. However, Sun Life Financial is 5.12 times less risky than Rackspace Technology. It trades about 0.01 of its potential returns per unit of risk. Rackspace Technology is currently generating about -0.01 per unit of risk. If you would invest  6,004  in Sun Life Financial on September 17, 2024 and sell it today you would earn a total of  9.00  from holding Sun Life Financial or generate 0.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sun Life Financial  vs.  Rackspace Technology

 Performance 
       Timeline  
Sun Life Financial 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Rackspace Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

Sun Life and Rackspace Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sun Life and Rackspace Technology

The main advantage of trading using opposite Sun Life and Rackspace Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life 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 Sun Life Financial 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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