Correlation Between Air Lease and Rivian Automotive

Can any of the company-specific risk be diversified away by investing in both Air Lease and Rivian Automotive 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 Air Lease and Rivian Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Lease and Rivian Automotive, you can compare the effects of market volatilities on Air Lease and Rivian Automotive 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 Air Lease with a short position of Rivian Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Rivian Automotive.

Diversification Opportunities for Air Lease and Rivian Automotive

0.56

Correlation Coefficient

Air Lease  Rivian Automotive

Very weak diversification

The 3 months correlation between Air and Rivian is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Air Lease 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 Air Lease are associated (or correlated) with Rivian Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivian Automotive has no effect on the direction of Air Lease i.e., Air Lease and Rivian Automotive go up and down completely randomly.

Pair Corralation between Air Lease and Rivian Automotive

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.4 times more return on investment than Rivian Automotive. However, Air Lease is 2.48 times less risky than Rivian Automotive. It trades about 0.04 of its potential returns per unit of risk. Rivian Automotive is currently generating about -0.02 per unit of risk. If you would invest  4,119  in Air Lease on September 24, 2024 and sell it today you would earn a total of  731.00  from holding Air Lease or generate 17.75% return on investment over 90 days.

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

Air Lease  vs.  Rivian Automotive

Air Lease

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rivian Automotive

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Rivian Automotive displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Rivian Automotive

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

The idea behind Air Lease and Rivian Automotive 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.