Correlation Between Rivian Automotive and Faraday Future

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

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

Diversification Opportunities for Rivian Automotive and Faraday Future

-0.54

Correlation Coefficient

Rivian Automotive  Faraday Future

Excellent diversification

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

Pair Corralation between Rivian Automotive and Faraday Future

Given the investment horizon of 90 days Rivian Automotive is expected to generate 5.48 times less return on investment than Faraday Future. But when comparing it to its historical volatility, Rivian Automotive is 3.1 times less risky than Faraday Future. It trades about 0.01 of its potential returns per unit of risk. Faraday Future Intelligent is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6.45  in Faraday Future Intelligent on December 29, 2024 and sell it today you would lose (2.06) from holding Faraday Future Intelligent or give up 31.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.05%
Values	Daily Returns

Rivian Automotive  vs.  Faraday Future Intelligent

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 recent stock price disarray, may contribute to short-term losses for the investors.

Faraday Future Intel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal technical and fundamental indicators, Faraday Future may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rivian Automotive and Faraday Future

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

The idea behind Rivian Automotive and Faraday Future Intelligent 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.