Correlation Between Wabash National and Rivian Automotive

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

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

Diversification Opportunities for Wabash National and Rivian Automotive

0.43

Correlation Coefficient

Wabash National  Rivian Automotive

Very weak diversification

The 3 months correlation between Wabash and Rivian is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Wabash National 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 Wabash National 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 Wabash National i.e., Wabash National and Rivian Automotive go up and down completely randomly.

Pair Corralation between Wabash National and Rivian Automotive

Considering the 90-day investment horizon Wabash National is expected to generate 2.56 times less return on investment than Rivian Automotive. But when comparing it to its historical volatility, Wabash National is 2.14 times less risky than Rivian Automotive. It trades about 0.04 of its potential returns per unit of risk. Rivian Automotive is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,323  in Rivian Automotive on September 10, 2024 and sell it today you would earn a total of  122.00  from holding Rivian Automotive or generate 9.22% return on investment over 90 days.

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

Wabash National  vs.  Rivian Automotive

Wabash National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Rivian Automotive

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 4 (%) 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.

Pair Trading with Wabash National and Rivian Automotive

The main advantage of trading using opposite Wabash National and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wabash National 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 Wabash National 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.