Correlation Between Malibu Boats and Dorman Products

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

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

Diversification Opportunities for Malibu Boats and Dorman Products

0.45

Correlation Coefficient

Malibu Boats  Dorman Products

Very weak diversification

The 3 months correlation between Malibu and Dorman is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Malibu Boats and Dorman Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorman Products 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 Dorman Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorman Products has no effect on the direction of Malibu Boats i.e., Malibu Boats and Dorman Products go up and down completely randomly.

Pair Corralation between Malibu Boats and Dorman Products

Given the investment horizon of 90 days Malibu Boats is expected to under-perform the Dorman Products. In addition to that, Malibu Boats is 1.59 times more volatile than Dorman Products. It trades about -0.13 of its total potential returns per unit of risk. Dorman Products is currently generating about -0.08 per unit of volatility. 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

Malibu Boats  vs.  Dorman Products

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.

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.

Pair Trading with Malibu Boats and Dorman Products

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

The idea behind Malibu Boats and Dorman Products 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.