Correlation Between Cars and Rivian Automotive

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Can any of the company-specific risk be diversified away by investing in both Cars 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 Cars and Rivian Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Rivian Automotive, you can compare the effects of market volatilities on Cars 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 Cars with a short position of Rivian Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Rivian Automotive.

Diversification Opportunities for Cars and Rivian Automotive

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Cars and Rivian is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Cars 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 Cars Inc 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 Cars i.e., Cars and Rivian Automotive go up and down completely randomly.

Pair Corralation between Cars and Rivian Automotive

Given the investment horizon of 90 days Cars Inc is expected to generate 0.48 times more return on investment than Rivian Automotive. However, Cars Inc is 2.08 times less risky than Rivian Automotive. It trades about 0.03 of its potential returns per unit of risk. Rivian Automotive is currently generating about -0.01 per unit of risk. If you would invest  1,678  in Cars Inc on September 10, 2024 and sell it today you would earn a total of  236.00  from holding Cars Inc or generate 14.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cars Inc  vs.  Rivian Automotive

 Performance 
       Timeline  
Cars Inc 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Cars may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Rivian Automotive 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 4 (%) 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.

Cars and Rivian Automotive Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cars and Rivian Automotive

The main advantage of trading using opposite Cars and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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 Cars Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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