Correlation Between Malibu Boats and Winnebago Industries

Can any of the company-specific risk be diversified away by investing in both Malibu Boats and Winnebago 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 Winnebago 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 Winnebago Industries, you can compare the effects of market volatilities on Malibu Boats and Winnebago 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 Winnebago Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malibu Boats and Winnebago Industries.

Diversification Opportunities for Malibu Boats and Winnebago Industries

0.39

Correlation Coefficient

Malibu Boats  Winnebago Industries

Weak diversification

The 3 months correlation between Malibu and Winnebago is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Malibu Boats and Winnebago Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winnebago 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 Winnebago Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winnebago Industries has no effect on the direction of Malibu Boats i.e., Malibu Boats and Winnebago Industries go up and down completely randomly.

Pair Corralation between Malibu Boats and Winnebago Industries

Given the investment horizon of 90 days Malibu Boats is expected to generate 0.96 times more return on investment than Winnebago Industries. However, Malibu Boats is 1.04 times less risky than Winnebago Industries. It trades about 0.13 of its potential returns per unit of risk. Winnebago Industries is currently generating about 0.0 per unit of risk. If you would invest  3,637  in Malibu Boats on August 30, 2024 and sell it today you would earn a total of  727.00  from holding Malibu Boats or generate 19.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Malibu Boats  vs.  Winnebago Industries

Malibu Boats

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Malibu Boats are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Malibu Boats unveiled solid returns over the last few months and may actually be approaching a breakup point.

Winnebago Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winnebago Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Winnebago Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Malibu Boats and Winnebago Industries

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

The idea behind Malibu Boats and Winnebago 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.