Correlation Between Rivian Automotive and Stepan

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

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

Diversification Opportunities for Rivian Automotive and Stepan

-0.09

Correlation Coefficient

Rivian Automotive  Stepan

Good diversification

The 3 months correlation between Rivian and Stepan is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Stepan go up and down completely randomly.

Pair Corralation between Rivian Automotive and Stepan

Given the investment horizon of 90 days Rivian Automotive is expected to generate 2.45 times more return on investment than Stepan. However, Rivian Automotive is 2.45 times more volatile than Stepan Company. It trades about 0.03 of its potential returns per unit of risk. Stepan Company is currently generating about -0.03 per unit of risk. If you would invest  1,145  in Rivian Automotive on September 3, 2024 and sell it today you would earn a total of  78.00  from holding Rivian Automotive or generate 6.81% return on investment over 90 days.

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

Rivian Automotive  vs.  Stepan Company

Rivian Automotive

Risk-Adjusted Performance

0 of 100

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

Stepan Company

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Rivian Automotive and Stepan

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

The idea behind Rivian Automotive and Stepan Company 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .