Correlation Between Rakuten and D MARKET

Can any of the company-specific risk be diversified away by investing in both Rakuten and D MARKET 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 D MARKET 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 D MARKET Electronic Services, you can compare the effects of market volatilities on Rakuten and D MARKET 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 D MARKET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rakuten and D MARKET.

Diversification Opportunities for Rakuten and D MARKET

0.55

Correlation Coefficient

Rakuten  D MARKET

Very weak diversification

The 3 months correlation between Rakuten and HEPS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rakuten Inc ADR and D MARKET Electronic Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on D MARKET Electronic 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 D MARKET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of D MARKET Electronic has no effect on the direction of Rakuten i.e., Rakuten and D MARKET go up and down completely randomly.

Pair Corralation between Rakuten and D MARKET

Assuming the 90 days horizon Rakuten Inc ADR is expected to generate 0.93 times more return on investment than D MARKET. However, Rakuten Inc ADR is 1.07 times less risky than D MARKET. It trades about 0.08 of its potential returns per unit of risk. D MARKET Electronic Services is currently generating about -0.04 per unit of risk. If you would invest  540.00  in Rakuten Inc ADR on December 28, 2024 and sell it today you would earn a total of  57.00  from holding Rakuten Inc ADR or generate 10.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Rakuten Inc ADR  vs.  D MARKET Electronic Services

Rakuten Inc ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rakuten Inc ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Rakuten showed solid returns over the last few months and may actually be approaching a breakup point.

D MARKET Electronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days D MARKET Electronic Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with Rakuten and D MARKET

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

The idea behind Rakuten Inc ADR and D MARKET Electronic Services 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.