Correlation Between Rivian Automotive and Cars

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

0.36

Correlation Coefficient

Rivian Automotive  Cars

Weak diversification

The 3 months correlation between Rivian and Cars is 0.36. 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 2.62 times more return on investment than Cars. However, Rivian Automotive is 2.62 times more volatile than Cars Inc. It trades about 0.24 of its potential returns per unit of risk. Cars Inc is currently generating about 0.12 per unit of risk. If you would invest  1,005  in Rivian Automotive on September 8, 2024 and sell it today you would earn a total of  296.50  from holding Rivian Automotive or generate 29.5% return on investment over 90 days.

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

Rivian Automotive  vs.  Cars Inc

Rivian Automotive

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 5 (%) 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.

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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.