Correlation Between Rakuten and Qurate Retail

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

Diversification Opportunities for Rakuten and Qurate Retail

0.55

Correlation Coefficient

Rakuten  Qurate Retail

Very weak diversification

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

Pair Corralation between Rakuten and Qurate Retail

Assuming the 90 days horizon Rakuten Inc ADR is expected to generate 0.58 times more return on investment than Qurate Retail. However, Rakuten Inc ADR is 1.74 times less risky than Qurate Retail. It trades about -0.05 of its potential returns per unit of risk. Qurate Retail Series is currently generating about -0.17 per unit of risk. If you would invest  593.00  in Rakuten Inc ADR on September 5, 2024 and sell it today you would lose (31.00) from holding Rakuten Inc ADR or give up 5.23% of portfolio value over 90 days.

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

Rakuten Inc ADR  vs.  Qurate Retail Series

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 inconsistent 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.

Qurate Retail Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qurate Retail Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat 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 Rakuten and Qurate Retail

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

The idea behind Rakuten Inc ADR and Qurate Retail Series 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.