Correlation Between Rivian Automotive and Transocean

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

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

Diversification Opportunities for Rivian Automotive and Transocean

0.74

Correlation Coefficient

Rivian Automotive  Transocean

Poor diversification

The 3 months correlation between Rivian and Transocean is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Transocean go up and down completely randomly.

Pair Corralation between Rivian Automotive and Transocean

Given the investment horizon of 90 days Rivian Automotive is expected to generate 1.38 times more return on investment than Transocean. However, Rivian Automotive is 1.38 times more volatile than Transocean. It trades about 0.01 of its potential returns per unit of risk. Transocean is currently generating about -0.03 per unit of risk. If you would invest  1,358  in Rivian Automotive on December 29, 2024 and sell it today you would lose (56.00) from holding Rivian Automotive or give up 4.12% of portfolio value over 90 days.

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

Rivian Automotive  vs.  Transocean

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.

Transocean

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rivian Automotive and Transocean

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

The idea behind Rivian Automotive and Transocean 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.