Correlation Between ThredUp and Rakuten
Can any of the company-specific risk be diversified away by investing in both ThredUp and Rakuten 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 ThredUp and Rakuten into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ThredUp and Rakuten Inc ADR, you can compare the effects of market volatilities on ThredUp and Rakuten 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 ThredUp with a short position of Rakuten. Check out your portfolio center. Please also check ongoing floating volatility patterns of ThredUp and Rakuten.
Diversification Opportunities for ThredUp and Rakuten
Very good diversification
The 3 months correlation between ThredUp and Rakuten is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ThredUp and Rakuten Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rakuten Inc ADR and ThredUp 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 ThredUp are associated (or correlated) with Rakuten. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rakuten Inc ADR has no effect on the direction of ThredUp i.e., ThredUp and Rakuten go up and down completely randomly.
Pair Corralation between ThredUp and Rakuten
Given the investment horizon of 90 days ThredUp is expected to generate 2.82 times more return on investment than Rakuten. However, ThredUp is 2.82 times more volatile than Rakuten Inc ADR. It trades about 0.04 of its potential returns per unit of risk. Rakuten Inc ADR is currently generating about 0.03 per unit of risk. If you would invest 167.00 in ThredUp on September 3, 2024 and sell it today you would earn a total of 6.00 from holding ThredUp or generate 3.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ThredUp vs. Rakuten Inc ADR
Performance |
| Timeline |
| ThredUp |
| Rakuten Inc ADR |
ThredUp and Rakuten Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ThredUp and Rakuten
The main advantage of trading using opposite ThredUp and Rakuten positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ThredUp position performs unexpectedly, Rakuten 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 Rakuten will offset losses from the drop in Rakuten's long position.The idea behind ThredUp and Rakuten Inc ADR 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.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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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