Correlation Between Winnebago Industries and Polaris Industries

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

Diversification Opportunities for Winnebago Industries and Polaris Industries

0.71

Correlation Coefficient

Winnebago Industries  Polaris Industries

Poor diversification

The 3 months correlation between Winnebago and Polaris is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Winnebago Industries and Polaris Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Industries and Winnebago 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 Winnebago 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 Winnebago Industries i.e., Winnebago Industries and Polaris Industries go up and down completely randomly.

Pair Corralation between Winnebago Industries and Polaris Industries

Considering the 90-day investment horizon Winnebago Industries is expected to under-perform the Polaris Industries. In addition to that, Winnebago Industries is 1.05 times more volatile than Polaris Industries. It trades about -0.21 of its total potential returns per unit of risk. Polaris Industries is currently generating about -0.18 per unit of volatility. If you would invest  9,463  in Polaris Industries on January 23, 2024 and sell it today you would lose (643.00) from holding Polaris Industries or give up 6.79% of portfolio value over 90 days.

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

Winnebago Industries  vs.  Polaris Industries

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 inconsistent 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.

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Winnebago Industries and Polaris Industries

The main advantage of trading using opposite Winnebago Industries and Polaris Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Winnebago 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 Winnebago 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.