Correlation Between Installed Building and Malibu Boats

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

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

Diversification Opportunities for Installed Building and Malibu Boats

0.59

Correlation Coefficient

Installed Building  Malibu Boats

Very weak diversification

The 3 months correlation between Installed and Malibu is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Installed Building Products and Malibu Boats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malibu Boats and Installed Building 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 Installed Building 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 Installed Building i.e., Installed Building and Malibu Boats go up and down completely randomly.

Pair Corralation between Installed Building and Malibu Boats

Considering the 90-day investment horizon Installed Building Products is expected to generate 0.95 times more return on investment than Malibu Boats. However, Installed Building Products is 1.05 times less risky than Malibu Boats. It trades about 0.01 of its potential returns per unit of risk. Malibu Boats is currently generating about -0.13 per unit of risk. If you would invest  17,234  in Installed Building Products on December 29, 2024 and sell it today you would lose (5.00) from holding Installed Building Products or give up 0.03% of portfolio value over 90 days.

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

Installed Building Products  vs.  Malibu Boats

Installed Building

Risk-Adjusted Performance

Very Weak

Over the last 90 days Installed Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Installed Building is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail 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 Installed Building and Malibu Boats

The main advantage of trading using opposite Installed Building and Malibu Boats positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Installed Building 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 Installed Building 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.