Correlation Between Harley Davidson and Winnebago Industries

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

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

Diversification Opportunities for Harley Davidson and Winnebago Industries

0.06

Correlation Coefficient

Harley Davidson  Winnebago Industries

Significant diversification

The 3 months correlation between Harley and Winnebago is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Harley Davidson and Winnebago Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winnebago Industries 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 Winnebago Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winnebago Industries has no effect on the direction of Harley Davidson i.e., Harley Davidson and Winnebago Industries go up and down completely randomly.

Pair Corralation between Harley Davidson and Winnebago Industries

Considering the 90-day investment horizon Harley Davidson is expected to under-perform the Winnebago Industries. In addition to that, Harley Davidson is 1.03 times more volatile than Winnebago Industries. It trades about -0.01 of its total potential returns per unit of risk. Winnebago Industries is currently generating about 0.02 per unit of volatility. If you would invest  5,062  in Winnebago Industries on September 17, 2024 and sell it today you would earn a total of  479.00  from holding Winnebago Industries or generate 9.46% return on investment over 90 days.

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

Harley Davidson  vs.  Winnebago Industries

Harley Davidson

Risk-Adjusted Performance

0 of 100

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Winnebago Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winnebago Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Winnebago Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Harley Davidson and Winnebago Industries

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

The idea behind Harley Davidson and Winnebago Industries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.