Correlation Between Malibu Boats and Curtiss Motorcycles

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

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

Diversification Opportunities for Malibu Boats and Curtiss Motorcycles

-0.38

Correlation Coefficient

Malibu Boats  Curtiss Motorcycles

Very good diversification

The 3 months correlation between Malibu and Curtiss is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Malibu Boats and Curtiss Motorcycles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Curtiss Motorcycles and Malibu Boats 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 Malibu Boats 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 Malibu Boats i.e., Malibu Boats and Curtiss Motorcycles go up and down completely randomly.

Pair Corralation between Malibu Boats and Curtiss Motorcycles

Given the investment horizon of 90 days Malibu Boats is expected to under-perform the Curtiss Motorcycles. But the stock apears to be less risky and, when comparing its historical volatility, Malibu Boats is 25.21 times less risky than Curtiss Motorcycles. The stock trades about 0.0 of its potential returns per unit of risk. The Curtiss Motorcycles is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9.70  in Curtiss Motorcycles on September 17, 2024 and sell it today you would lose (4.70) from holding Curtiss Motorcycles or give up 48.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.66%
Values	Daily Returns

Malibu Boats  vs.  Curtiss Motorcycles

Malibu Boats

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Malibu Boats are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Malibu Boats may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Curtiss Motorcycles

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Motorcycles are ranked lower than 14 (%) 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 Malibu Boats and Curtiss Motorcycles

The main advantage of trading using opposite Malibu Boats and Curtiss Motorcycles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malibu Boats 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 Malibu Boats 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.