Correlation Between Porsche Automobile and Rivian Automotive

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

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

Diversification Opportunities for Porsche Automobile and Rivian Automotive

0.32

Correlation Coefficient

Porsche Automobile  Rivian Automotive

Weak diversification

The 3 months correlation between Porsche and Rivian is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Porsche Automobile Holding and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Porsche Automobile 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 Porsche Automobile Holding 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 Porsche Automobile i.e., Porsche Automobile and Rivian Automotive go up and down completely randomly.

Pair Corralation between Porsche Automobile and Rivian Automotive

Assuming the 90 days horizon Porsche Automobile Holding is expected to under-perform the Rivian Automotive. But the pink sheet apears to be less risky and, when comparing its historical volatility, Porsche Automobile Holding is 2.32 times less risky than Rivian Automotive. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Rivian Automotive is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,315  in Rivian Automotive on September 2, 2024 and sell it today you would lose (92.00) from holding Rivian Automotive or give up 7.0% of portfolio value over 90 days.

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

Porsche Automobile Holding  vs.  Rivian Automotive

Porsche Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Porsche Automobile Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Rivian Automotive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rivian Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Rivian Automotive is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Porsche Automobile and Rivian Automotive

The main advantage of trading using opposite Porsche Automobile and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porsche Automobile 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 Porsche Automobile Holding 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.