Correlation Between Rivian Automotive and Xpeng

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

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

Diversification Opportunities for Rivian Automotive and Xpeng

-0.83

Correlation Coefficient

Rivian Automotive  Xpeng

Pay attention - limited upside

The 3 months correlation between Rivian and Xpeng is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Xpeng Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xpeng Inc 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 Xpeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xpeng Inc has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Xpeng go up and down completely randomly.

Pair Corralation between Rivian Automotive and Xpeng

Given the investment horizon of 90 days Rivian Automotive is expected to generate 31.64 times less return on investment than Xpeng. But when comparing it to its historical volatility, Rivian Automotive is 1.04 times less risky than Xpeng. It trades about 0.01 of its potential returns per unit of risk. Xpeng Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,187  in Xpeng Inc on December 29, 2024 and sell it today you would earn a total of  783.00  from holding Xpeng Inc or generate 65.96% return on investment over 90 days.

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

Rivian Automotive  vs.  Xpeng Inc

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.

Xpeng Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xpeng Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Xpeng showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rivian Automotive and Xpeng

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

The idea behind Rivian Automotive and Xpeng Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.