Correlation Between Rocket Internet and Trade Desk

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

By analyzing existing cross correlation between Rocket Internet SE and The Trade Desk, you can compare the effects of market volatilities on Rocket Internet and Trade Desk 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 Rocket Internet with a short position of Trade Desk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Internet and Trade Desk.

Diversification Opportunities for Rocket Internet and Trade Desk

0.13

Correlation Coefficient

Rocket Internet  Trade Desk

Average diversification

The 3 months correlation between Rocket and Trade is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and The Trade Desk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Desk and Rocket Internet 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 Rocket Internet SE are associated (or correlated) with Trade Desk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Desk has no effect on the direction of Rocket Internet i.e., Rocket Internet and Trade Desk go up and down completely randomly.

Pair Corralation between Rocket Internet and Trade Desk

Assuming the 90 days trading horizon Rocket Internet SE is expected to under-perform the Trade Desk. But the stock apears to be less risky and, when comparing its historical volatility, Rocket Internet SE is 1.79 times less risky than Trade Desk. The stock trades about -0.03 of its potential returns per unit of risk. The The Trade Desk is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,607  in The Trade Desk on October 23, 2024 and sell it today you would earn a total of  7,295  from holding The Trade Desk or generate 158.35% return on investment over 90 days.

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

Rocket Internet SE  vs.  The Trade Desk

Rocket Internet SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Trade Desk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Trade Desk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Trade Desk unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocket Internet and Trade Desk

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

The idea behind Rocket Internet SE and The Trade Desk 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.