Correlation Between Flexible Solutions and Rivian Automotive

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

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

Diversification Opportunities for Flexible Solutions and Rivian Automotive

-0.05

Correlation Coefficient

Flexible Solutions  Rivian Automotive

Good diversification

The 3 months correlation between Flexible and Rivian is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Flexible Solutions 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 Flexible Solutions International 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 Flexible Solutions i.e., Flexible Solutions and Rivian Automotive go up and down completely randomly.

Pair Corralation between Flexible Solutions and Rivian Automotive

Considering the 90-day investment horizon Flexible Solutions is expected to generate 4.63 times less return on investment than Rivian Automotive. But when comparing it to its historical volatility, Flexible Solutions International is 1.34 times less risky than Rivian Automotive. It trades about 0.02 of its potential returns per unit of risk. Rivian Automotive is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,191  in Rivian Automotive on September 23, 2024 and sell it today you would earn a total of  192.00  from holding Rivian Automotive or generate 16.12% return on investment over 90 days.

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

Flexible Solutions Internation  vs.  Rivian Automotive

Flexible Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Flexible Solutions is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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 Flexible Solutions and Rivian Automotive

The main advantage of trading using opposite Flexible Solutions and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexible Solutions 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 Flexible Solutions International 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.