Correlation Between VF and Malibu Boats

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

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

Diversification Opportunities for VF and Malibu Boats

0.8

Correlation Coefficient

VF  Malibu Boats

Very poor diversification

The 3 months correlation between VF and Malibu is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding VF Corp. and Malibu Boats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malibu Boats and VF 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 VF Corporation 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 VF i.e., VF and Malibu Boats go up and down completely randomly.

Pair Corralation between VF and Malibu Boats

Considering the 90-day investment horizon VF Corporation is expected to generate 1.11 times more return on investment than Malibu Boats. However, VF is 1.11 times more volatile than Malibu Boats. It trades about -0.3 of its potential returns per unit of risk. Malibu Boats is currently generating about -0.42 per unit of risk. If you would invest  1,534  in VF Corporation on January 28, 2024 and sell it today you would lose (270.00) from holding VF Corporation or give up 17.6% of portfolio value over 90 days.

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

VF Corp.  vs.  Malibu Boats

VF Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VF Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 abnormal 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 VF and Malibu Boats

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

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.