Correlation Between Dogness International and Malibu Boats

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

By analyzing existing cross correlation between Dogness International Corp and Malibu Boats, you can compare the effects of market volatilities on Dogness International and Malibu Boats 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 Dogness International with a short position of Malibu Boats. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dogness International and Malibu Boats.

Diversification Opportunities for Dogness International and Malibu Boats

0.5

Correlation Coefficient

Dogness International  Malibu Boats

Very weak diversification

The 3 months correlation between Dogness and Malibu is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dogness International Corp and Malibu Boats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malibu Boats and Dogness International 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 Dogness International Corp are associated (or correlated) with Malibu Boats. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malibu Boats has no effect on the direction of Dogness International i.e., Dogness International and Malibu Boats go up and down completely randomly.

Pair Corralation between Dogness International and Malibu Boats

Given the investment horizon of 90 days Dogness International Corp is expected to generate 4.97 times more return on investment than Malibu Boats. However, Dogness International is 4.97 times more volatile than Malibu Boats. It trades about 0.03 of its potential returns per unit of risk. Malibu Boats is currently generating about -0.04 per unit of risk. If you would invest  4,580  in Dogness International Corp on November 20, 2024 and sell it today you would lose (1,275) from holding Dogness International Corp or give up 27.84% of portfolio value over 90 days.

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

Dogness International Corp  vs.  Malibu Boats

Dogness International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dogness International Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dogness International showed solid returns over the last few months and may actually be approaching a breakup point.

Malibu Boats

Risk-Adjusted Performance

Very Weak

Over the last 90 days Malibu Boats has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Dogness International and Malibu Boats

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

The idea behind Dogness International Corp and Malibu Boats 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.