Correlation Between Rivian Automotive and Better Home

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

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

Diversification Opportunities for Rivian Automotive and Better Home

0.34

Correlation Coefficient

Rivian Automotive  Better Home

Weak diversification

The 3 months correlation between Rivian and Better is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Better Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Home Finance 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 Better Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Home Finance has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Better Home go up and down completely randomly.

Pair Corralation between Rivian Automotive and Better Home

Given the investment horizon of 90 days Rivian Automotive is expected to under-perform the Better Home. But the stock apears to be less risky and, when comparing its historical volatility, Rivian Automotive is 4.39 times less risky than Better Home. The stock trades about -0.01 of its potential returns per unit of risk. The Better Home Finance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Better Home Finance on December 28, 2024 and sell it today you would lose (1.34) from holding Better Home Finance or give up 12.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.85%
Values	Daily Returns

Rivian Automotive  vs.  Better Home Finance

Rivian Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rivian Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Rivian Automotive is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Better Home Finance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Better Home Finance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Better Home showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rivian Automotive and Better Home

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

The idea behind Rivian Automotive and Better Home Finance 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.