Correlation Between Rivian Automotive and PSI All

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

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

Diversification Opportunities for Rivian Automotive and PSI All

-0.14

Correlation Coefficient

Rivian Automotive  PSI All

Good diversification

The 3 months correlation between Rivian and PSI is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and PSI All Share in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSI All Share 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 PSI All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSI All Share has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and PSI All go up and down completely randomly.

Pair Corralation between Rivian Automotive and PSI All

Given the investment horizon of 90 days Rivian Automotive is expected to generate 7.19 times more return on investment than PSI All. However, Rivian Automotive is 7.19 times more volatile than PSI All Share. It trades about 0.39 of its potential returns per unit of risk. PSI All Share is currently generating about -0.11 per unit of risk. If you would invest  1,031  in Rivian Automotive on September 15, 2024 and sell it today you would earn a total of  406.00  from holding Rivian Automotive or generate 39.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Rivian Automotive  vs.  PSI All Share

Pair Trading with Rivian Automotive and PSI All

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

The idea behind Rivian Automotive and PSI All Share 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.