Correlation Between Rakuten and 1StdibsCom

Can any of the company-specific risk be diversified away by investing in both Rakuten and 1StdibsCom 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 Rakuten and 1StdibsCom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rakuten Inc ADR and 1StdibsCom, you can compare the effects of market volatilities on Rakuten and 1StdibsCom 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 Rakuten with a short position of 1StdibsCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rakuten and 1StdibsCom.

Diversification Opportunities for Rakuten and 1StdibsCom

0.87

Correlation Coefficient

Rakuten  1StdibsCom

Very poor diversification

The 3 months correlation between Rakuten and 1StdibsCom is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Rakuten Inc ADR and 1StdibsCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1StdibsCom and Rakuten 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 Rakuten Inc ADR are associated (or correlated) with 1StdibsCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1StdibsCom has no effect on the direction of Rakuten i.e., Rakuten and 1StdibsCom go up and down completely randomly.

Pair Corralation between Rakuten and 1StdibsCom

Assuming the 90 days horizon Rakuten Inc ADR is expected to under-perform the 1StdibsCom. In addition to that, Rakuten is 1.41 times more volatile than 1StdibsCom. It trades about -0.1 of its total potential returns per unit of risk. 1StdibsCom is currently generating about -0.13 per unit of volatility. If you would invest  472.00  in 1StdibsCom on September 4, 2024 and sell it today you would lose (82.00) from holding 1StdibsCom or give up 17.37% of portfolio value over 90 days.

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

Rakuten Inc ADR  vs.  1StdibsCom

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.

1StdibsCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1StdibsCom 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 fundamental drivers remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Rakuten and 1StdibsCom

The main advantage of trading using opposite Rakuten and 1StdibsCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rakuten position performs unexpectedly, 1StdibsCom 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 1StdibsCom will offset losses from the drop in 1StdibsCom's long position.

The idea behind Rakuten Inc ADR and 1StdibsCom 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.