Correlation Between Dorman Products and Malibu Boats

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

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

Diversification Opportunities for Dorman Products and Malibu Boats

0.45

Correlation Coefficient

Dorman Products  Malibu Boats

Very weak diversification

The 3 months correlation between Dorman and Malibu is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Malibu Boats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malibu Boats and Dorman Products 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 Dorman Products 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 Dorman Products i.e., Dorman Products and Malibu Boats go up and down completely randomly.

Pair Corralation between Dorman Products and Malibu Boats

Given the investment horizon of 90 days Dorman Products is expected to generate 0.63 times more return on investment than Malibu Boats. However, Dorman Products is 1.59 times less risky than Malibu Boats. It trades about -0.08 of its potential returns per unit of risk. Malibu Boats is currently generating about -0.13 per unit of risk. If you would invest  13,125  in Dorman Products on December 28, 2024 and sell it today you would lose (1,054) from holding Dorman Products or give up 8.03% of portfolio value over 90 days.

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

Dorman Products  vs.  Malibu Boats

Dorman Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dorman Products 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Dorman Products and Malibu Boats

The main advantage of trading using opposite Dorman Products and Malibu Boats positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorman Products 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 Dorman Products 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.