Correlation Between Rivian Automotive and BRP

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

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

Diversification Opportunities for Rivian Automotive and BRP

-0.05

Correlation Coefficient

Rivian Automotive  BRP

Good diversification

The 3 months correlation between Rivian and BRP is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and BRP go up and down completely randomly.

Pair Corralation between Rivian Automotive and BRP

Given the investment horizon of 90 days Rivian Automotive is expected to generate 2.13 times more return on investment than BRP. However, Rivian Automotive is 2.13 times more volatile than BRP Inc. It trades about 0.01 of its potential returns per unit of risk. BRP Inc is currently generating about -0.02 per unit of risk. If you would invest  1,734  in Rivian Automotive on September 23, 2024 and sell it today you would lose (351.00) from holding Rivian Automotive or give up 20.24% of portfolio value over 90 days.

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

Rivian Automotive  vs.  BRP Inc

Rivian Automotive

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 5 (%) 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.

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Rivian Automotive and BRP

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

The idea behind Rivian Automotive and BRP 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.