Correlation Between Rivian Automotive and American Airlines

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

By analyzing existing cross correlation between Rivian Automotive and American Airlines Group, you can compare the effects of market volatilities on Rivian Automotive and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rivian Automotive and American Airlines.

Diversification Opportunities for Rivian Automotive and American Airlines

0.62

Correlation Coefficient

Rivian Automotive  American Airlines

Poor diversification

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

Pair Corralation between Rivian Automotive and American Airlines

Given the investment horizon of 90 days Rivian Automotive is expected to generate 1.64 times more return on investment than American Airlines. However, Rivian Automotive is 1.64 times more volatile than American Airlines Group. It trades about 0.02 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.0 per unit of risk. If you would invest  1,187  in Rivian Automotive on December 1, 2024 and sell it today you would lose (3.00) from holding Rivian Automotive or give up 0.25% of portfolio value over 90 days.

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

Rivian Automotive  vs.  American Airlines Group

Rivian Automotive

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 1 (%) 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 April 2025.

American Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, American Airlines is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Rivian Automotive and American Airlines

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

The idea behind Rivian Automotive and American Airlines Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.