Correlation Between Rivian Automotive and Nio

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

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

Diversification Opportunities for Rivian Automotive and Nio

-0.03

Correlation Coefficient

Rivian Automotive  Nio

Good diversification

The 3 months correlation between Rivian and Nio is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Nio go up and down completely randomly.

Pair Corralation between Rivian Automotive and Nio

Given the investment horizon of 90 days Rivian Automotive is expected to generate 1.49 times more return on investment than Nio. However, Rivian Automotive is 1.49 times more volatile than Nio Class A. It trades about 0.0 of its potential returns per unit of risk. Nio Class A is currently generating about -0.01 per unit of risk. If you would invest  1,223  in Rivian Automotive on November 28, 2024 and sell it today you would lose (78.00) from holding Rivian Automotive or give up 6.38% 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.  Nio Class A

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.

Nio Class A

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rivian Automotive and Nio

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

The idea behind Rivian Automotive and Nio Class A 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.