Correlation Between Rivian Automotive and Volkswagen

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

By analyzing existing cross correlation between Rivian Automotive and Volkswagen AG 110, you can compare the effects of market volatilities on Rivian Automotive and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rivian Automotive and Volkswagen.

Diversification Opportunities for Rivian Automotive and Volkswagen

-0.49

Correlation Coefficient

Rivian Automotive  Volkswagen

Very good diversification

The 3 months correlation between Rivian and Volkswagen is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG 110 has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Volkswagen go up and down completely randomly.

Pair Corralation between Rivian Automotive and Volkswagen

Given the investment horizon of 90 days Rivian Automotive is expected to generate 2.95 times more return on investment than Volkswagen. However, Rivian Automotive is 2.95 times more volatile than Volkswagen AG 110. It trades about 0.01 of its potential returns per unit of risk. Volkswagen AG 110 is currently generating about -0.45 per unit of risk. If you would invest  1,013  in Rivian Automotive on February 4, 2024 and sell it today you would lose (6.00) from holding Rivian Automotive or give up 0.59% of portfolio value over 90 days.

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

Rivian Automotive  vs.  Volkswagen AG 110

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Volkswagen AG 110

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG 110 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Volkswagen is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rivian Automotive and Volkswagen

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

The idea behind Rivian Automotive and Volkswagen AG 110 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.