Correlation Between TRI Pointe and Polaris Industries

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

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

Diversification Opportunities for TRI Pointe and Polaris Industries

0.73

Correlation Coefficient

TRI Pointe  Polaris Industries

Poor diversification

The 3 months correlation between TRI and Polaris is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding TRI Pointe Homes and Polaris Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Industries and TRI Pointe 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 TRI Pointe Homes 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 TRI Pointe i.e., TRI Pointe and Polaris Industries go up and down completely randomly.

Pair Corralation between TRI Pointe and Polaris Industries

Considering the 90-day investment horizon TRI Pointe is expected to generate 3.18 times less return on investment than Polaris Industries. But when comparing it to its historical volatility, TRI Pointe Homes is 1.43 times less risky than Polaris Industries. It trades about 0.11 of its potential returns per unit of risk. Polaris Industries is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,345  in Polaris Industries on April 23, 2025 and sell it today you would earn a total of  1,858  from holding Polaris Industries or generate 55.55% return on investment over 90 days.

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

TRI Pointe Homes  vs.  Polaris Industries

TRI Pointe Homes

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRI Pointe Homes are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, TRI Pointe demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Polaris Industries

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Industries are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Polaris Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRI Pointe and Polaris Industries

The main advantage of trading using opposite TRI Pointe and Polaris Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRI Pointe 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 TRI Pointe Homes 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.