Correlation Between Rakuten and ThredUp

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

Diversification Opportunities for Rakuten and ThredUp

0.77

Correlation Coefficient

Rakuten  ThredUp

Poor diversification

The 3 months correlation between Rakuten and ThredUp is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Rakuten Inc ADR and ThredUp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ThredUp 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 ThredUp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ThredUp has no effect on the direction of Rakuten i.e., Rakuten and ThredUp go up and down completely randomly.

Pair Corralation between Rakuten and ThredUp

Assuming the 90 days horizon Rakuten is expected to generate 8.23 times less return on investment than ThredUp. But when comparing it to its historical volatility, Rakuten Inc ADR is 2.96 times less risky than ThredUp. It trades about 0.06 of its potential returns per unit of risk. ThredUp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  146.00  in ThredUp on December 29, 2024 and sell it today you would earn a total of  113.00  from holding ThredUp or generate 77.4% return on investment over 90 days.

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

Rakuten Inc ADR  vs.  ThredUp

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.

ThredUp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ThredUp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ThredUp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rakuten and ThredUp

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

The idea behind Rakuten Inc ADR and ThredUp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.