Correlation Between Harley Davidson and Curtiss Motorcycles

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

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

Diversification Opportunities for Harley Davidson and Curtiss Motorcycles

0.46

Correlation Coefficient

Harley Davidson  Curtiss Motorcycles

Very weak diversification

The 3 months correlation between Harley and Curtiss is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Harley Davidson and Curtiss Motorcycles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Curtiss Motorcycles and Harley Davidson 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 Harley Davidson are associated (or correlated) with Curtiss Motorcycles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Curtiss Motorcycles has no effect on the direction of Harley Davidson i.e., Harley Davidson and Curtiss Motorcycles go up and down completely randomly.

Pair Corralation between Harley Davidson and Curtiss Motorcycles

Considering the 90-day investment horizon Harley Davidson is expected to under-perform the Curtiss Motorcycles. But the stock apears to be less risky and, when comparing its historical volatility, Harley Davidson is 8.92 times less risky than Curtiss Motorcycles. The stock trades about -0.13 of its potential returns per unit of risk. The Curtiss Motorcycles is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.60  in Curtiss Motorcycles on December 26, 2024 and sell it today you would lose (1.20) from holding Curtiss Motorcycles or give up 33.33% of portfolio value over 90 days.

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

Harley Davidson  vs.  Curtiss Motorcycles

Harley Davidson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harley Davidson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Curtiss Motorcycles

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Motorcycles are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Curtiss Motorcycles unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harley Davidson and Curtiss Motorcycles

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

The idea behind Harley Davidson and Curtiss Motorcycles 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.