Correlation Between Thor Industries and Polaris Industries

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

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

Diversification Opportunities for Thor Industries and Polaris Industries

0.25

Correlation Coefficient

Thor Industries  Polaris Industries

Modest diversification

The 3 months correlation between Thor and Polaris is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Thor Industries and Polaris Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Industries and Thor Industries 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 Thor Industries are associated (or correlated) with Polaris Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Industries has no effect on the direction of Thor Industries i.e., Thor Industries and Polaris Industries go up and down completely randomly.

Pair Corralation between Thor Industries and Polaris Industries

Considering the 90-day investment horizon Thor Industries is expected to generate 1.2 times more return on investment than Polaris Industries. However, Thor Industries is 1.2 times more volatile than Polaris Industries. It trades about -0.1 of its potential returns per unit of risk. Polaris Industries is currently generating about -0.25 per unit of risk. If you would invest  10,936  in Thor Industries on January 25, 2024 and sell it today you would lose (570.00) from holding Thor Industries or give up 5.21% of portfolio value over 90 days.

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

Thor Industries  vs.  Polaris Industries

Thor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Polaris Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polaris Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Polaris Industries is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Thor Industries and Polaris Industries

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

The idea behind Thor Industries and Polaris 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.