Correlation Between Polaris Industries and MCBC Holdings

Can any of the company-specific risk be diversified away by investing in both Polaris Industries and MCBC Holdings 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 Polaris Industries and MCBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Polaris Industries and MCBC Holdings, you can compare the effects of market volatilities on Polaris Industries and MCBC Holdings 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 Polaris Industries with a short position of MCBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polaris Industries and MCBC Holdings.

Diversification Opportunities for Polaris Industries and MCBC Holdings

-0.55

Correlation Coefficient

Polaris Industries  MCBC Holdings

Excellent diversification

The 3 months correlation between Polaris and MCBC is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Polaris Industries and MCBC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCBC Holdings and Polaris Industries 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 Polaris Industries are associated (or correlated) with MCBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCBC Holdings has no effect on the direction of Polaris Industries i.e., Polaris Industries and MCBC Holdings go up and down completely randomly.

Pair Corralation between Polaris Industries and MCBC Holdings

Considering the 90-day investment horizon Polaris Industries is expected to under-perform the MCBC Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Polaris Industries is 2.63 times less risky than MCBC Holdings. The stock trades about -0.1 of its potential returns per unit of risk. The MCBC Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,729  in MCBC Holdings on August 31, 2024 and sell it today you would earn a total of  387.00  from holding MCBC Holdings or generate 22.38% return on investment over 90 days.

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

Polaris Industries  vs.  MCBC Holdings

Polaris Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polaris Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

MCBC Holdings

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MCBC Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MCBC Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polaris Industries and MCBC Holdings

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

The idea behind Polaris Industries and MCBC Holdings 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 the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.