Correlation Between Nio and Rivian Automotive
Can any of the company-specific risk be diversified away by investing in both Nio 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 Nio and Rivian Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nio Class A and Rivian Automotive, you can compare the effects of market volatilities on Nio 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 Nio with a short position of Rivian Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Rivian Automotive.
Diversification Opportunities for Nio and Rivian Automotive
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nio and Rivian is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Nio 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 Nio Class A 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 Nio i.e., Nio and Rivian Automotive go up and down completely randomly.
Pair Corralation between Nio and Rivian Automotive
Considering the 90-day investment horizon Nio Class A is expected to under-perform the Rivian Automotive. But the stock apears to be less risky and, when comparing its historical volatility, Nio Class A is 1.1 times less risky than Rivian Automotive. The stock trades about -0.03 of its potential returns per unit of risk. The Rivian Automotive is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,789 in Rivian Automotive on August 27, 2024 and sell it today you would lose (1,765) from holding Rivian Automotive or give up 63.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nio Class A vs. Rivian Automotive
Performance |
| Timeline |
| Nio Class A |
| Rivian Automotive |
Nio and Rivian Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nio and Rivian Automotive
The main advantage of trading using opposite Nio and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio 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 Nio Class A 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.| Rivian Automotive vs. Nio Class A | Rivian Automotive vs. Lucid Group | Rivian Automotive vs. Tesla Inc | Rivian Automotive vs. Mullen Automotive |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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