Correlation Between Rakuten and Jeffs Brands

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

Diversification Opportunities for Rakuten and Jeffs Brands

-0.46

Correlation Coefficient

Rakuten  Jeffs Brands

Very good diversification

The 3 months correlation between Rakuten and Jeffs is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Rakuten Inc ADR and Jeffs Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeffs Brands 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 Jeffs Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeffs Brands has no effect on the direction of Rakuten i.e., Rakuten and Jeffs Brands go up and down completely randomly.

Pair Corralation between Rakuten and Jeffs Brands

Assuming the 90 days horizon Rakuten Inc ADR is expected to generate 0.56 times more return on investment than Jeffs Brands. However, Rakuten Inc ADR is 1.79 times less risky than Jeffs Brands. It trades about 0.06 of its potential returns per unit of risk. Jeffs Brands is currently generating about -0.25 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  38.00  from holding Rakuten Inc ADR or generate 7.04% return on investment over 90 days.

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

Rakuten Inc ADR  vs.  Jeffs Brands

Rakuten Inc ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rakuten Inc ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Rakuten may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Jeffs Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jeffs Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Rakuten and Jeffs Brands

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

The idea behind Rakuten Inc ADR and Jeffs Brands 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.