Correlation Between Harley Davidson and LCI Industries
Can any of the company-specific risk be diversified away by investing in both Harley Davidson and LCI 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 Harley Davidson and LCI Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Harley Davidson and LCI Industries, you can compare the effects of market volatilities on Harley Davidson and LCI 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 Harley Davidson with a short position of LCI Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harley Davidson and LCI Industries.
Diversification Opportunities for Harley Davidson and LCI Industries
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Harley and LCI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Harley Davidson and LCI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCI Industries and Harley Davidson 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 Harley Davidson are associated (or correlated) with LCI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCI Industries has no effect on the direction of Harley Davidson i.e., Harley Davidson and LCI Industries go up and down completely randomly.
Pair Corralation between Harley Davidson and LCI Industries
Assuming the 90 days horizon Harley Davidson is expected to under-perform the LCI Industries. But the stock apears to be less risky and, when comparing its historical volatility, Harley Davidson is 1.08 times less risky than LCI Industries. The stock trades about -0.1 of its potential returns per unit of risk. The LCI Industries is currently generating about 0.01 of returns per unit of risk over similar time horizon. 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harley Davidson vs. LCI Industries
Performance |
| Timeline |
| Harley Davidson |
| LCI Industries |
Harley Davidson and LCI Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harley Davidson and LCI Industries
The main advantage of trading using opposite Harley Davidson and LCI Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harley Davidson position performs unexpectedly, LCI 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 LCI Industries will offset losses from the drop in LCI Industries' long position.| Harley Davidson vs. Harley Davidson | Harley Davidson vs. BRP Inc | Harley Davidson vs. Fox Factory Holding | Harley Davidson vs. Thor Industries |
| LCI Industries vs. SYSTEMAIR AB | LCI Industries vs. Delta Air Lines | LCI Industries vs. FAIR ISAAC | LCI Industries vs. Air New Zealand |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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