Correlation Between RH and Coupang LLC
Can any of the company-specific risk be diversified away by investing in both RH and Coupang LLC 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 RH and Coupang LLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RH and Coupang LLC, you can compare the effects of market volatilities on RH and Coupang LLC 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 RH with a short position of Coupang LLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of RH and Coupang LLC.
Diversification Opportunities for RH and Coupang LLC
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RH and Coupang is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding RH and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC and RH 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 RH are associated (or correlated) with Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of RH i.e., RH and Coupang LLC go up and down completely randomly.
Pair Corralation between RH and Coupang LLC
Allowing for the 90-day total investment horizon RH is expected to generate 0.88 times more return on investment than Coupang LLC. However, RH is 1.14 times less risky than Coupang LLC. It trades about 0.1 of its potential returns per unit of risk. Coupang LLC is currently generating about -0.01 per unit of risk. If you would invest 33,629 in RH on August 26, 2024 and sell it today you would earn a total of 3,172 from holding RH or generate 9.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RH vs. Coupang LLC
Performance |
| Timeline |
| RH |
| Coupang LLC |
RH and Coupang LLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RH and Coupang LLC
The main advantage of trading using opposite RH and Coupang LLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RH position performs unexpectedly, Coupang LLC 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 Coupang LLC will offset losses from the drop in Coupang LLC's long position.The idea behind RH and Coupang LLC 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.| Coupang LLC vs. Sea | Coupang LLC vs. Wayfair | Coupang LLC vs. Chewy Inc | Coupang LLC vs. Vipshop Holdings Limited |
Check out your portfolio center.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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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