Correlation Between Rivian Automotive and Aeye

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

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

Diversification Opportunities for Rivian Automotive and Aeye

0.22

Correlation Coefficient

Rivian Automotive  Aeye

Modest diversification

The 3 months correlation between Rivian and Aeye is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye 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 Aeye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeye Inc has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Aeye go up and down completely randomly.

Pair Corralation between Rivian Automotive and Aeye

Given the investment horizon of 90 days Rivian Automotive is expected to generate 1.15 times more return on investment than Aeye. However, Rivian Automotive is 1.15 times more volatile than Aeye Inc. It trades about 0.15 of its potential returns per unit of risk. Aeye Inc is currently generating about 0.02 per unit of risk. If you would invest  1,039  in Rivian Automotive on August 31, 2024 and sell it today you would earn a total of  184.00  from holding Rivian Automotive or generate 17.71% 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.  Aeye Inc

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.

Aeye Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeye Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Aeye is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Rivian Automotive and Aeye

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

The idea behind Rivian Automotive and Aeye 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.