Correlation Between Stellantis and Rivian Automotive

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

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

Diversification Opportunities for Stellantis and Rivian Automotive

0.87

Correlation Coefficient

Stellantis  Rivian Automotive

Very poor diversification

The 3 months correlation between Stellantis and Rivian is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Stellantis NV and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Stellantis 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 Stellantis NV are associated (or correlated) with Rivian Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivian Automotive has no effect on the direction of Stellantis i.e., Stellantis and Rivian Automotive go up and down completely randomly.

Pair Corralation between Stellantis and Rivian Automotive

Given the investment horizon of 90 days Stellantis NV is expected to under-perform the Rivian Automotive. But the stock apears to be less risky and, when comparing its historical volatility, Stellantis NV is 2.94 times less risky than Rivian Automotive. The stock trades about -0.08 of its potential returns per unit of risk. The Rivian Automotive is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,047  in Rivian Automotive on August 30, 2024 and sell it today you would earn a total of  175.00  from holding Rivian Automotive or generate 16.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Stellantis NV  vs.  Rivian Automotive

Stellantis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stellantis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Stellantis and Rivian Automotive

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

The idea behind Stellantis NV and Rivian Automotive 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.