Correlation Between HR Block and Winnebago Industries

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

By analyzing existing cross correlation between HR Block and Winnebago Industries, you can compare the effects of market volatilities on HR Block 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 HR Block with a short position of Winnebago Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of HR Block and Winnebago Industries.

Diversification Opportunities for HR Block and Winnebago Industries

-0.26

Correlation Coefficient

HR Block  Winnebago Industries

Very good diversification

The 3 months correlation between HRB and Winnebago is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding HR Block and Winnebago Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winnebago Industries and HR Block 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 HR Block 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 HR Block i.e., HR Block and Winnebago Industries go up and down completely randomly.

Pair Corralation between HR Block and Winnebago Industries

Considering the 90-day investment horizon HR Block is expected to generate 0.9 times more return on investment than Winnebago Industries. However, HR Block is 1.11 times less risky than Winnebago Industries. It trades about -0.01 of its potential returns per unit of risk. Winnebago Industries is currently generating about -0.08 per unit of risk. If you would invest  5,049  in HR Block on March 3, 2024 and sell it today you would lose (85.00) from holding HR Block or give up 1.68% of portfolio value over 90 days.

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

HR Block  vs.  Winnebago Industries

HR Block

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HR Block has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HR Block is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 latest abnormal performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with HR Block and Winnebago Industries

The main advantage of trading using opposite HR Block and Winnebago Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HR Block 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 HR Block 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.