Correlation Between Rivian Automotive and Cars

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

Diversification Opportunities for Rivian Automotive and Cars

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Rivian and Cars is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Rivian Automotive 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 Rivian Automotive are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Cars go up and down completely randomly.

Pair Corralation between Rivian Automotive and Cars

Given the investment horizon of 90 days Rivian Automotive is expected to generate 2.11 times more return on investment than Cars. However, Rivian Automotive is 2.11 times more volatile than Cars Inc. It trades about 0.02 of its potential returns per unit of risk. Cars Inc is currently generating about 0.02 per unit of risk. If you would invest  1,344  in Rivian Automotive on September 6, 2024 and sell it today you would lose (148.00) from holding Rivian Automotive or give up 11.01% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Rivian Automotive  vs.  Cars Inc

 Performance 
       Timeline  
Rivian Automotive 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Cars Inc 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Cars unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rivian Automotive and Cars Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rivian Automotive and Cars

The main advantage of trading using opposite Rivian Automotive and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rivian Automotive position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.
The idea behind Rivian Automotive and Cars Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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