Correlation Between Ree Automotive and NVR

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

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

Diversification Opportunities for Ree Automotive and NVR

-0.62

Correlation Coefficient

Ree Automotive  NVR

Excellent diversification

The 3 months correlation between Ree and NVR is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ree Automotive Holding and NVR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVR Inc and Ree 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 Ree Automotive Holding are associated (or correlated) with NVR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVR Inc has no effect on the direction of Ree Automotive i.e., Ree Automotive and NVR go up and down completely randomly.

Pair Corralation between Ree Automotive and NVR

Considering the 90-day investment horizon Ree Automotive Holding is expected to generate 4.55 times more return on investment than NVR. However, Ree Automotive is 4.55 times more volatile than NVR Inc. It trades about 0.02 of its potential returns per unit of risk. NVR Inc is currently generating about 0.08 per unit of risk. If you would invest  1,191  in Ree Automotive Holding on September 30, 2024 and sell it today you would lose (237.00) from holding Ree Automotive Holding or give up 19.9% of portfolio value over 90 days.

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

Ree Automotive Holding  vs.  NVR Inc

Ree Automotive Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ree Automotive Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Ree Automotive exhibited solid returns over the last few months and may actually be approaching a breakup point.

NVR Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Ree Automotive and NVR

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

The idea behind Ree Automotive Holding and NVR Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.