Correlation Between Harley Davidson and Winnebago Industries
Can any of the company-specific risk be diversified away by investing in both Harley Davidson and Winnebago 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 Winnebago 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 Winnebago Industries, you can compare the effects of market volatilities on Harley Davidson and Winnebago 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 Winnebago Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harley Davidson and Winnebago Industries.
Diversification Opportunities for Harley Davidson and Winnebago Industries
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Harley and Winnebago is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Harley Davidson and Winnebago Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winnebago 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 Winnebago Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winnebago Industries has no effect on the direction of Harley Davidson i.e., Harley Davidson and Winnebago Industries go up and down completely randomly.
Pair Corralation between Harley Davidson and Winnebago Industries
Assuming the 90 days horizon Harley Davidson is expected to generate 0.81 times more return on investment than Winnebago Industries. However, Harley Davidson is 1.23 times less risky than Winnebago Industries. It trades about -0.1 of its potential returns per unit of risk. Winnebago Industries is currently generating about -0.21 per unit of risk. If you would invest 2,990 in Harley Davidson on October 19, 2024 and sell it today you would lose (115.00) from holding Harley Davidson or give up 3.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Harley Davidson vs. Winnebago Industries
Performance |
| Timeline |
| Harley Davidson |
| Winnebago Industries |
Harley Davidson and Winnebago Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harley Davidson and Winnebago Industries
The main advantage of trading using opposite Harley Davidson and Winnebago Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harley Davidson position performs unexpectedly, Winnebago 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 Winnebago Industries will offset losses from the drop in Winnebago Industries' long position.| Harley Davidson vs. Harley Davidson | Harley Davidson vs. BRP Inc | Harley Davidson vs. Fox Factory Holding | Harley Davidson vs. Thor Industries |
| Winnebago Industries vs. DALATA HOTEL | Winnebago Industries vs. InterContinental Hotels Group | Winnebago Industries vs. PPHE HOTEL GROUP | Winnebago Industries vs. Japan Tobacco |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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