Correlation Between Harley Davidson and Fox Factory

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

Diversification Opportunities for Harley Davidson and Fox Factory

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Harley and Fox Factory is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Harley-Davidson and Fox Factory Cp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fox Factory Cp 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 Fox Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fox Factory Cp has no effect on the direction of Harley Davidson i.e., Harley Davidson and Fox Factory go up and down completely randomly.

Pair Corralation between Harley Davidson and Fox Factory

Considering the 90-day investment horizon Harley Davidson is expected to generate 2.79 times less return on investment than Fox Factory. But when comparing it to its historical volatility, Harley-Davidson is 1.09 times less risky than Fox Factory. It trades about 0.06 of its potential returns per unit of risk. Fox Factory Cp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  8,164  in Fox Factory Cp on May 15, 2022 and sell it today you would earn a total of  2,981  from holding Fox Factory Cp or generate 36.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Harley-Davidson  vs.  Fox Factory Cp

 Performance (%) 
       Timeline  
Harley-Davidson 
Harley Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Harley-Davidson are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Harley Davidson may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Harley Price Channel

Fox Factory Cp 
Fox Factory Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fox Factory Cp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fox Factory exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fox Factory Price Channel

Harley Davidson and Fox Factory Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Harley Davidson and Fox Factory

The main advantage of trading using opposite Harley Davidson and Fox Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harley Davidson position performs unexpectedly, Fox Factory 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 Fox Factory will offset losses from the drop in Fox Factory's long position.
The idea behind Harley-Davidson and Fox Factory Cp 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.
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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