Correlation Between Phonex and Rakuten

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

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

Diversification Opportunities for Phonex and Rakuten

-0.22

Correlation Coefficient

Phonex  Rakuten

Very good diversification

The 3 months correlation between Phonex and Rakuten is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Phonex Inc and Rakuten Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rakuten Inc ADR and Phonex 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 Phonex Inc are associated (or correlated) with Rakuten. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rakuten Inc ADR has no effect on the direction of Phonex i.e., Phonex and Rakuten go up and down completely randomly.

Pair Corralation between Phonex and Rakuten

Given the investment horizon of 90 days Phonex Inc is expected to generate 0.95 times more return on investment than Rakuten. However, Phonex Inc is 1.05 times less risky than Rakuten. It trades about 0.03 of its potential returns per unit of risk. Rakuten Inc ADR is currently generating about -0.11 per unit of risk. If you would invest  107.00  in Phonex Inc on September 3, 2024 and sell it today you would earn a total of  3.00  from holding Phonex Inc or generate 2.8% return on investment over 90 days.

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

Phonex Inc  vs.  Rakuten Inc ADR

Phonex Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phonex Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Phonex is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Rakuten Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rakuten Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Phonex and Rakuten

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

The idea behind Phonex Inc and Rakuten Inc ADR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.