Correlation Between Rivian Automotive and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Rivian Automotive and Sensient Technologies 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 Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rivian Automotive and Sensient Technologies, you can compare the effects of market volatilities on Rivian Automotive and Sensient Technologies 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 Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rivian Automotive and Sensient Technologies.
Diversification Opportunities for Rivian Automotive and Sensient Technologies
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rivian and Sensient is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies 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 Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Sensient Technologies go up and down completely randomly.
Pair Corralation between Rivian Automotive and Sensient Technologies
Given the investment horizon of 90 days Rivian Automotive is expected to generate 4.47 times more return on investment than Sensient Technologies. However, Rivian Automotive is 4.47 times more volatile than Sensient Technologies. It trades about 0.22 of its potential returns per unit of risk. Sensient Technologies is currently generating about -0.34 per unit of risk. If you would invest 1,160 in Rivian Automotive on September 25, 2024 and sell it today you would earn a total of 253.00 from holding Rivian Automotive or generate 21.81% 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. Sensient Technologies
Performance |
Timeline |
Rivian Automotive |
Sensient Technologies |
Rivian Automotive and Sensient Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Rivian Automotive and Sensient Technologies
The main advantage of trading using opposite Rivian Automotive and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rivian Automotive position performs unexpectedly, Sensient Technologies 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 Sensient Technologies will offset losses from the drop in Sensient Technologies' long position.Rivian Automotive vs. Nio Class A | Rivian Automotive vs. Xpeng Inc | Rivian Automotive vs. Mullen Automotive | Rivian Automotive vs. Tesla Inc |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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