Correlation Between Malibu Boats and Polaris Industries

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

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

Diversification Opportunities for Malibu Boats and Polaris Industries

0.56

Correlation Coefficient

Malibu Boats  Polaris Industries

Very weak diversification

The 3 months correlation between Malibu and Polaris is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Malibu Boats and Polaris Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Industries 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 Polaris Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Industries has no effect on the direction of Malibu Boats i.e., Malibu Boats and Polaris Industries go up and down completely randomly.

Pair Corralation between Malibu Boats and Polaris Industries

Given the investment horizon of 90 days Malibu Boats is expected to generate 0.81 times more return on investment than Polaris Industries. However, Malibu Boats is 1.23 times less risky than Polaris Industries. It trades about -0.13 of its potential returns per unit of risk. Polaris Industries is currently generating about -0.14 per unit of risk. If you would invest  3,691  in Malibu Boats on December 29, 2024 and sell it today you would lose (734.00) from holding Malibu Boats or give up 19.89% 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.  Polaris Industries

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.

Polaris Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polaris Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Malibu Boats and Polaris Industries

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

The idea behind Malibu Boats and Polaris Industries 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 Global Correlations module to find global opportunities by holding instruments from different markets.