Correlation Between Under Armour and Malibu Boats

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

By analyzing existing cross correlation between Under Armour C and Malibu Boats, you can compare the effects of market volatilities on Under Armour and Malibu Boats 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 Under Armour with a short position of Malibu Boats. Check out your portfolio center. Please also check ongoing floating volatility patterns of Under Armour and Malibu Boats.

Diversification Opportunities for Under Armour and Malibu Boats

0.86

Correlation Coefficient

Under Armour  Malibu Boats

Very poor diversification

The 3 months correlation between Under and Malibu is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and Malibu Boats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malibu Boats and Under Armour 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 Under Armour C are associated (or correlated) with Malibu Boats. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malibu Boats has no effect on the direction of Under Armour i.e., Under Armour and Malibu Boats go up and down completely randomly.

Pair Corralation between Under Armour and Malibu Boats

Allowing for the 90-day total investment horizon Under Armour C is expected to under-perform the Malibu Boats. But the stock apears to be less risky and, when comparing its historical volatility, Under Armour C is 1.09 times less risky than Malibu Boats. The stock trades about -0.15 of its potential returns per unit of risk. The Malibu Boats is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,055  in Malibu Boats on November 20, 2024 and sell it today you would lose (318.00) from holding Malibu Boats or give up 7.84% of portfolio value over 90 days.

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

Under Armour C  vs.  Malibu Boats

Under Armour C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Under Armour C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest weak 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 Under Armour and Malibu Boats

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

The idea behind Under Armour C and Malibu Boats 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.