Correlation Between Rivian Automotive and GM

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

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

Diversification Opportunities for Rivian Automotive and GM

-0.8

Correlation Coefficient

Rivian Automotive  GM

Pay attention - limited upside

The 3 months correlation between Rivian and GM is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and GM go up and down completely randomly.

Pair Corralation between Rivian Automotive and GM

Given the investment horizon of 90 days Rivian Automotive is expected to under-perform the GM. In addition to that, Rivian Automotive is 2.31 times more volatile than General Motors. It trades about -0.24 of its total potential returns per unit of risk. General Motors is currently generating about -0.05 per unit of volatility. If you would invest  4,540  in General Motors on February 1, 2024 and sell it today you would lose (87.00) from holding General Motors or give up 1.92% of portfolio value over 90 days.

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

Rivian Automotive  vs.  General Motors

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

General Motors

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rivian Automotive and GM

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

The idea behind Rivian Automotive and General Motors 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.