Correlation Between Malibu Boats and Mattel

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

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

Diversification Opportunities for Malibu Boats and Mattel

0.72

Correlation Coefficient

Malibu Boats  Mattel

Poor diversification

The 3 months correlation between Malibu and Mattel is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Malibu Boats and Mattel Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mattel Inc 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 Mattel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mattel Inc has no effect on the direction of Malibu Boats i.e., Malibu Boats and Mattel go up and down completely randomly.

Pair Corralation between Malibu Boats and Mattel

Given the investment horizon of 90 days Malibu Boats is expected to under-perform the Mattel. In addition to that, Malibu Boats is 1.26 times more volatile than Mattel Inc. It trades about -0.15 of its total potential returns per unit of risk. Mattel Inc is currently generating about -0.14 per unit of volatility. If you would invest  2,021  in Mattel Inc on October 6, 2024 and sell it today you would lose (227.00) from holding Mattel Inc or give up 11.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Malibu Boats  vs.  Mattel Inc

Malibu Boats

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Malibu Boats is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Malibu Boats and Mattel

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

The idea behind Malibu Boats and Mattel Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.