Correlation Between Rackspace Technology and Dropbox

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

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

Diversification Opportunities for Rackspace Technology and Dropbox

-0.52

Correlation Coefficient

Rackspace Technology  Dropbox

Excellent diversification

The 3 months correlation between Rackspace and Dropbox is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rackspace Technology and Dropbox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dropbox 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 Dropbox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dropbox has no effect on the direction of Rackspace Technology i.e., Rackspace Technology and Dropbox go up and down completely randomly.

Pair Corralation between Rackspace Technology and Dropbox

Considering the 90-day investment horizon Rackspace Technology is expected to under-perform the Dropbox. In addition to that, Rackspace Technology is 3.87 times more volatile than Dropbox. It trades about -0.02 of its total potential returns per unit of risk. Dropbox is currently generating about -0.04 per unit of volatility. If you would invest  2,861  in Dropbox on May 2, 2025 and sell it today you would lose (106.00) from holding Dropbox or give up 3.7% of portfolio value over 90 days.

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

Rackspace Technology  vs.  Dropbox

Rackspace Technology

Risk-Adjusted Performance

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 weak 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.

Dropbox

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dropbox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Dropbox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rackspace Technology and Dropbox

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

The idea behind Rackspace Technology and Dropbox 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.