Correlation Between Rakuten and Carvana
Can any of the company-specific risk be diversified away by investing in both Rakuten and Carvana 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 Carvana 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 Carvana Co, you can compare the effects of market volatilities on Rakuten and Carvana 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 Carvana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rakuten and Carvana.
Diversification Opportunities for Rakuten and Carvana
Almost no diversification
The 3 months correlation between Rakuten and Carvana is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Rakuten Inc ADR and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana 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 Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of Rakuten i.e., Rakuten and Carvana go up and down completely randomly.
Pair Corralation between Rakuten and Carvana
Assuming the 90 days horizon Rakuten Inc ADR is expected to under-perform the Carvana. But the pink sheet apears to be less risky and, when comparing its historical volatility, Rakuten Inc ADR is 3.93 times less risky than Carvana. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Carvana Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,877 in Carvana Co on January 27, 2024 and sell it today you would earn a total of 3,873 from holding Carvana Co or generate 99.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rakuten Inc ADR vs. Carvana Co
Performance |
| Timeline |
| Rakuten Inc ADR |
| Carvana |
Rakuten and Carvana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rakuten and Carvana
The main advantage of trading using opposite Rakuten and Carvana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rakuten position performs unexpectedly, Carvana 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 Carvana will offset losses from the drop in Carvana's long position.| Rakuten vs. Qurate Retail Series | Rakuten vs. ThredUp | Rakuten vs. AKA Brands Holding | Rakuten vs. Alibaba Group Holding |
| Carvana vs. Motorcar Parts of | Carvana vs. Standard Motor Products | Carvana vs. Stoneridge | Carvana vs. Douglas Dynamics |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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