Correlation Between Rivian Automotive and BorgWarner

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

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

Diversification Opportunities for Rivian Automotive and BorgWarner

-0.54

Correlation Coefficient

Rivian Automotive  BorgWarner

Excellent diversification

The 3 months correlation between Rivian and BorgWarner is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner 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 BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and BorgWarner go up and down completely randomly.

Pair Corralation between Rivian Automotive and BorgWarner

Given the investment horizon of 90 days Rivian Automotive is expected to generate 3.47 times more return on investment than BorgWarner. However, Rivian Automotive is 3.47 times more volatile than BorgWarner. It trades about 0.16 of its potential returns per unit of risk. BorgWarner is currently generating about -0.1 per unit of risk. If you would invest  1,049  in Rivian Automotive on October 7, 2024 and sell it today you would earn a total of  600.00  from holding Rivian Automotive or generate 57.2% return on investment over 90 days.

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

Rivian Automotive  vs.  BorgWarner

Rivian Automotive

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Rivian Automotive displayed solid returns over the last few months and may actually be approaching a breakup point.

BorgWarner

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BorgWarner has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Rivian Automotive and BorgWarner

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

The idea behind Rivian Automotive and BorgWarner 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 Global Correlations module to find global opportunities by holding instruments from different markets.