Correlation Between Rivian Automotive and Eastman Chemical

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

By analyzing existing cross correlation between Rivian Automotive and Eastman Chemical, you can compare the effects of market volatilities on Rivian Automotive and Eastman Chemical 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 Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rivian Automotive and Eastman Chemical.

Diversification Opportunities for Rivian Automotive and Eastman Chemical

-0.42

Correlation Coefficient

Rivian Automotive  Eastman Chemical

Very good diversification

The 3 months correlation between Rivian and Eastman is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical 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 Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Eastman Chemical go up and down completely randomly.

Pair Corralation between Rivian Automotive and Eastman Chemical

Given the investment horizon of 90 days Rivian Automotive is expected to generate 3.54 times more return on investment than Eastman Chemical. However, Rivian Automotive is 3.54 times more volatile than Eastman Chemical. It trades about 0.08 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.11 per unit of risk. If you would invest  1,290  in Rivian Automotive on September 18, 2024 and sell it today you would earn a total of  244.00  from holding Rivian Automotive or generate 18.91% return on investment over 90 days.

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

Rivian Automotive  vs.  Eastman Chemical

Rivian Automotive

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 6 (%) 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.

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Rivian Automotive and Eastman Chemical

The main advantage of trading using opposite Rivian Automotive and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rivian Automotive position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.

The idea behind Rivian Automotive and Eastman Chemical 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.