Correlation Between Rivian Automotive and Toyota
Can any of the company-specific risk be diversified away by investing in both Rivian Automotive and Toyota 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 Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rivian Automotive and Toyota Motor, you can compare the effects of market volatilities on Rivian Automotive and Toyota 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 Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rivian Automotive and Toyota.
Diversification Opportunities for Rivian Automotive and Toyota
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rivian and Toyota is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Toyota go up and down completely randomly.
Pair Corralation between Rivian Automotive and Toyota
Given the investment horizon of 90 days Rivian Automotive is expected to under-perform the Toyota. In addition to that, Rivian Automotive is 3.03 times more volatile than Toyota Motor. It trades about -0.03 of its total potential returns per unit of risk. Toyota Motor is currently generating about 0.03 per unit of volatility. If you would invest 14,073 in Toyota Motor on August 23, 2024 and sell it today you would earn a total of 3,265 from holding Toyota Motor or generate 23.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rivian Automotive vs. Toyota Motor
Performance |
| Timeline |
| Rivian Automotive |
| Toyota Motor |
Rivian Automotive and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rivian Automotive and Toyota
The main advantage of trading using opposite Rivian Automotive and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rivian Automotive position performs unexpectedly, Toyota 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 Toyota will offset losses from the drop in Toyota's long position.| Rivian Automotive vs. Nio Class A | Rivian Automotive vs. Xpeng Inc | Rivian Automotive vs. Mullen Automotive | Rivian Automotive vs. Tesla Inc |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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