Correlation Between Tesla and Rivian Automotive
Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and Rivian Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Rivian Automotive, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of Rivian Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Rivian Automotive.
Diversification Opportunities for Tesla and Rivian Automotive
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tesla and Rivian is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Rivian Automotive go up and down completely randomly.
Pair Corralation between Tesla and Rivian Automotive
Given the investment horizon of 90 days Tesla Inc is expected to generate 0.81 times more return on investment than Rivian Automotive. However, Tesla Inc is 1.24 times less risky than Rivian Automotive. It trades about 0.05 of its potential returns per unit of risk. Rivian Automotive is currently generating about -0.02 per unit of risk. If you would invest 17,982 in Tesla Inc on August 27, 2024 and sell it today you would earn a total of 17,274 from holding Tesla Inc or generate 96.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Rivian Automotive
Performance |
| Timeline |
| Tesla Inc |
| Rivian Automotive |
Tesla and Rivian Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Rivian Automotive
The main advantage of trading using opposite Tesla and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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