Correlation Between Malibu Boats and Harley Davidson
Can any of the company-specific risk be diversified away by investing in both Malibu Boats and Harley Davidson 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 Harley Davidson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Malibu Boats and Harley Davidson, you can compare the effects of market volatilities on Malibu Boats and Harley Davidson 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 Harley Davidson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malibu Boats and Harley Davidson.
Diversification Opportunities for Malibu Boats and Harley Davidson
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Malibu and Harley is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Malibu Boats and Harley Davidson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harley Davidson 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 Harley Davidson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harley Davidson has no effect on the direction of Malibu Boats i.e., Malibu Boats and Harley Davidson go up and down completely randomly.
Pair Corralation between Malibu Boats and Harley Davidson
Given the investment horizon of 90 days Malibu Boats is expected to under-perform the Harley Davidson. In addition to that, Malibu Boats is 1.51 times more volatile than Harley Davidson. It trades about -0.29 of its total potential returns per unit of risk. Harley Davidson is currently generating about -0.23 per unit of volatility. If you would invest 2,629 in Harley Davidson on December 5, 2024 and sell it today you would lose (216.00) from holding Harley Davidson or give up 8.22% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Malibu Boats vs. Harley Davidson
Performance |
Timeline |
Malibu Boats |
Harley Davidson |
Malibu Boats and Harley Davidson Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Malibu Boats and Harley Davidson
The main advantage of trading using opposite Malibu Boats and Harley Davidson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malibu Boats position performs unexpectedly, Harley Davidson 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 Harley Davidson will offset losses from the drop in Harley Davidson's long position.Malibu Boats vs. Polaris Industries | Malibu Boats vs. MCBC Holdings | Malibu Boats vs. LCI Industries | Malibu Boats vs. Thor Industries |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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