Correlation Between Tesla and Rivian Automotive

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

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

Diversification Opportunities for Tesla and Rivian Automotive

0.6

Correlation Coefficient

Tesla  Rivian Automotive

Poor diversification

The 3 months correlation between Tesla and Rivian is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Rivian Automotive go up and down completely randomly.

Pair Corralation between Tesla and Rivian Automotive

Given the investment horizon of 90 days Tesla Inc is expected to generate 1.24 times more return on investment than Rivian Automotive. However, Tesla is 1.24 times more volatile than Rivian Automotive. It trades about 0.08 of its potential returns per unit of risk. Rivian Automotive is currently generating about 0.01 per unit of risk. If you would invest  17,298  in Tesla Inc on February 7, 2024 and sell it today you would earn a total of  1,178  from holding Tesla Inc or generate 6.81% return on investment over 90 days.

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

Tesla Inc  vs.  Rivian Automotive

Tesla Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Tesla is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 unfluctuating 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.

Pair Trading with Tesla and Rivian Automotive

The main advantage of trading using opposite Tesla and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..