Correlation Between Marine Products and Malibu Boats

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

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

Diversification Opportunities for Marine Products and Malibu Boats

-0.02

Correlation Coefficient

Marine Products  Malibu Boats

Good diversification

The 3 months correlation between Marine and Malibu is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Marine Products and Malibu Boats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malibu Boats and Marine Products 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 Marine Products 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 Marine Products i.e., Marine Products and Malibu Boats go up and down completely randomly.

Pair Corralation between Marine Products and Malibu Boats

Considering the 90-day investment horizon Marine Products is expected to generate 1.16 times more return on investment than Malibu Boats. However, Marine Products is 1.16 times more volatile than Malibu Boats. It trades about 0.01 of its potential returns per unit of risk. Malibu Boats is currently generating about -0.02 per unit of risk. If you would invest  1,124  in Marine Products on January 24, 2024 and sell it today you would lose (11.00) from holding Marine Products or give up 0.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Marine Products  vs.  Malibu Boats

Marine Products

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Marine Products and Malibu Boats

The main advantage of trading using opposite Marine Products and Malibu Boats positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marine Products 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 Marine Products 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.