Correlation Between Geely Automobile and Rivian Automotive

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

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

Diversification Opportunities for Geely Automobile and Rivian Automotive

-0.44

Correlation Coefficient

Geely Automobile  Rivian Automotive

Very good diversification

The 3 months correlation between Geely and Rivian is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Geely Automobile 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 Geely Automobile Holdings 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 Geely Automobile i.e., Geely Automobile and Rivian Automotive go up and down completely randomly.

Pair Corralation between Geely Automobile and Rivian Automotive

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 0.94 times more return on investment than Rivian Automotive. However, Geely Automobile Holdings is 1.07 times less risky than Rivian Automotive. It trades about 0.23 of its potential returns per unit of risk. Rivian Automotive is currently generating about 0.03 per unit of risk. If you would invest  2,315  in Geely Automobile Holdings on September 12, 2024 and sell it today you would earn a total of  1,708  from holding Geely Automobile Holdings or generate 73.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Geely Automobile Holdings  vs.  Rivian Automotive

Geely Automobile Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Geely Automobile showed solid returns over the last few months and may actually be approaching a breakup point.

Rivian Automotive

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Rivian Automotive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Geely Automobile and Rivian Automotive

The main advantage of trading using opposite Geely Automobile and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geely Automobile 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 Geely Automobile Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.