Correlation Between Malibu Boats and Singing Machine

Can any of the company-specific risk be diversified away by investing in both Malibu Boats and Singing Machine 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 Malibu Boats and Singing Machine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Malibu Boats and The Singing Machine, you can compare the effects of market volatilities on Malibu Boats and Singing Machine 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 Malibu Boats with a short position of Singing Machine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malibu Boats and Singing Machine.

Diversification Opportunities for Malibu Boats and Singing Machine

-0.4

Correlation Coefficient

Malibu Boats  Singing Machine

Very good diversification

The 3 months correlation between Malibu and Singing is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Malibu Boats and The Singing Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singing Machine and Malibu Boats 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 Malibu Boats are associated (or correlated) with Singing Machine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singing Machine has no effect on the direction of Malibu Boats i.e., Malibu Boats and Singing Machine go up and down completely randomly.

Pair Corralation between Malibu Boats and Singing Machine

Given the investment horizon of 90 days Malibu Boats is expected to under-perform the Singing Machine. But the stock apears to be less risky and, when comparing its historical volatility, Malibu Boats is 3.71 times less risky than Singing Machine. The stock trades about -0.23 of its potential returns per unit of risk. The The Singing Machine is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  74.00  in The Singing Machine on January 27, 2024 and sell it today you would earn a total of  27.00  from holding The Singing Machine or generate 36.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Malibu Boats  vs.  The Singing Machine

Malibu Boats

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Malibu Boats has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Singing Machine

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Singing Machine are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Singing Machine unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Malibu Boats and Singing Machine

The main advantage of trading using opposite Malibu Boats and Singing Machine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malibu Boats position performs unexpectedly, Singing Machine 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 Singing Machine will offset losses from the drop in Singing Machine's long position.

The idea behind Malibu Boats and The Singing Machine 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.