Correlation Between Malibu Boats and LCI Industries

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

Diversification Opportunities for Malibu Boats and LCI Industries

0.38

Correlation Coefficient

Malibu Boats  LCI Industries

Weak diversification

The 3 months correlation between Malibu and LCI is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Malibu Boats and LCI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCI 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 LCI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCI Industries has no effect on the direction of Malibu Boats i.e., Malibu Boats and LCI Industries go up and down completely randomly.

Pair Corralation between Malibu Boats and LCI Industries

Given the investment horizon of 90 days Malibu Boats is expected to under-perform the LCI Industries. In addition to that, Malibu Boats is 1.23 times more volatile than LCI Industries. It trades about -0.28 of its total potential returns per unit of risk. LCI Industries is currently generating about -0.2 per unit of volatility. If you would invest  11,852  in LCI Industries on January 21, 2024 and sell it today you would lose (1,210) from holding LCI Industries or give up 10.21% of portfolio value over 90 days.

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

Malibu Boats  vs.  LCI Industries

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 unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

LCI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LCI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Malibu Boats and LCI Industries

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

The idea behind Malibu Boats and LCI 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.