Correlation Between Microsoft and Malibu Boats
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Malibu Boats into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Malibu Boats, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Malibu Boats. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Malibu Boats.
Diversification Opportunities for Microsoft and Malibu Boats
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Malibu is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Malibu Boats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malibu Boats and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Malibu Boats go up and down completely randomly.
Pair Corralation between Microsoft and Malibu Boats
Given the investment horizon of 90 days Microsoft is expected to generate 0.32 times more return on investment than Malibu Boats. However, Microsoft is 3.13 times less risky than Malibu Boats. It trades about 0.51 of its potential returns per unit of risk. Malibu Boats is currently generating about -0.01 per unit of risk. If you would invest 41,493 in Microsoft on September 18, 2024 and sell it today you would earn a total of 3,953 from holding Microsoft or generate 9.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Malibu Boats
Performance |
| Timeline |
| Microsoft |
| Malibu Boats |
Microsoft and Malibu Boats Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Malibu Boats
The main advantage of trading using opposite Microsoft and Malibu Boats positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
| Malibu Boats vs. Polaris Industries | Malibu Boats vs. MCBC Holdings | Malibu Boats vs. LCI Industries | Malibu Boats vs. Thor Industries |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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