Correlation Between Amazon and Malibu Boats

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Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Malibu Boats into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Malibu Boats, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Malibu Boats. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Malibu Boats.

Diversification Opportunities for Amazon and Malibu Boats

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Amazon and Malibu is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Malibu Boats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malibu Boats and Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Malibu Boats go up and down completely randomly.

Pair Corralation between Amazon and Malibu Boats

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Malibu Boats. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.1 times less risky than Malibu Boats. The stock trades about -0.03 of its potential returns per unit of risk. The Malibu Boats is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,919  in Malibu Boats on August 31, 2022 and sell it today you would lose (261.00)  from holding Malibu Boats or give up 4.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Amazon Inc  vs.  Malibu Boats

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Malibu Boats 
Malibu Performance
0 of 100
Over the last 90 days Malibu Boats has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Malibu Boats is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Malibu Price Channel

Amazon and Malibu Boats Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Malibu Boats

The main advantage of trading using opposite Amazon and Malibu Boats positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon Inc and Malibu Boats 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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