Correlation Between Stem and Rackspace Technology
Can any of the company-specific risk be diversified away by investing in both Stem 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 Stem and Rackspace Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stem Inc and Rackspace Technology, you can compare the effects of market volatilities on Stem 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 Stem with a short position of Rackspace Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem and Rackspace Technology.
Diversification Opportunities for Stem and Rackspace Technology
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Stem and Rackspace is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Rackspace Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackspace Technology and Stem 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 Stem Inc 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 Stem i.e., Stem and Rackspace Technology go up and down completely randomly.
Pair Corralation between Stem and Rackspace Technology
Given the investment horizon of 90 days Stem Inc is expected to under-perform the Rackspace Technology. In addition to that, Stem is 1.31 times more volatile than Rackspace Technology. It trades about -0.07 of its total potential returns per unit of risk. Rackspace Technology is currently generating about 0.03 per unit of volatility. If you would invest 244.00 in Rackspace Technology on August 28, 2024 and sell it today you would earn a total of 24.00 from holding Rackspace Technology or generate 9.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stem Inc vs. Rackspace Technology
Performance |
| Timeline |
| Stem Inc |
| Rackspace Technology |
Stem and Rackspace Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stem and Rackspace Technology
The main advantage of trading using opposite Stem and Rackspace Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stem 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.| Stem vs. Palo Alto Networks | Stem vs. Crowdstrike Holdings | Stem vs. Cloudflare | Stem vs. Palantir Technologies |
| Rackspace Technology vs. GigaCloud Technology Class | Rackspace Technology vs. Alarum Technologies | Rackspace Technology vs. Stem Inc | Rackspace Technology vs. Pagaya Technologies |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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