Correlation Between LCI Industries and Harley Davidson
Can any of the company-specific risk be diversified away by investing in both LCI Industries and Harley Davidson 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 LCI Industries and Harley Davidson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LCI Industries and Harley Davidson, you can compare the effects of market volatilities on LCI Industries and Harley Davidson 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 LCI Industries with a short position of Harley Davidson. Check out your portfolio center. Please also check ongoing floating volatility patterns of LCI Industries and Harley Davidson.
Diversification Opportunities for LCI Industries and Harley Davidson
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LCI and Harley is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and Harley Davidson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harley Davidson and LCI 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 LCI Industries are associated (or correlated) with Harley Davidson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harley Davidson has no effect on the direction of LCI Industries i.e., LCI Industries and Harley Davidson go up and down completely randomly.
Pair Corralation between LCI Industries and Harley Davidson
Assuming the 90 days horizon LCI Industries is expected to generate 0.9 times more return on investment than Harley Davidson. However, LCI Industries is 1.11 times less risky than Harley Davidson. It trades about 0.01 of its potential returns per unit of risk. Harley Davidson is currently generating about -0.1 per unit of risk. If you would invest 10,400 in LCI Industries on October 19, 2024 and sell it today you would earn a total of 0.00 from holding LCI Industries or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 88.89% |
| Values | Daily Returns |
LCI Industries vs. Harley Davidson
Performance |
| Timeline |
| LCI Industries |
| Harley Davidson |
LCI Industries and Harley Davidson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LCI Industries and Harley Davidson
The main advantage of trading using opposite LCI Industries and Harley Davidson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LCI Industries position performs unexpectedly, Harley Davidson 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 Harley Davidson will offset losses from the drop in Harley Davidson's long position.| LCI Industries vs. SYSTEMAIR AB | LCI Industries vs. Delta Air Lines | LCI Industries vs. FAIR ISAAC | LCI Industries vs. Air New Zealand |
| Harley Davidson vs. 24SEVENOFFICE GROUP AB | Harley Davidson vs. GEELY AUTOMOBILE | Harley Davidson vs. Cairo Communication SpA | Harley Davidson vs. KENEDIX OFFICE INV |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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