Correlation Between Lucid and Rivian Automotive

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

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

Diversification Opportunities for Lucid and Rivian Automotive

0.03

Correlation Coefficient

Lucid  Rivian Automotive

Significant diversification

The 3 months correlation between Lucid and Rivian is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive and Lucid 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 Lucid Group 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 Lucid i.e., Lucid and Rivian Automotive go up and down completely randomly.

Pair Corralation between Lucid and Rivian Automotive

Given the investment horizon of 90 days Lucid Group is expected to generate 1.06 times more return on investment than Rivian Automotive. However, Lucid is 1.06 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 -0.19 per unit of risk. If you would invest  382.00  in Lucid Group on July 3, 2024 and sell it today you would lose (29.00) from holding Lucid Group or give up 7.59% of portfolio value over 90 days.

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

Lucid Group  vs.  Rivian Automotive

Lucid Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lucid Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward indicators, Lucid exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 November 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Lucid and Rivian Automotive

The main advantage of trading using opposite Lucid and Rivian Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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 Lucid Group 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.