Correlation Between Pool and Applied Industrial
Can any of the company-specific risk be diversified away by investing in both Pool and Applied Industrial 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 Pool and Applied Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and Applied Industrial Technologies, you can compare the effects of market volatilities on Pool and Applied Industrial 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 Pool with a short position of Applied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and Applied Industrial.
Diversification Opportunities for Pool and Applied Industrial
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pool and Applied is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial and Pool 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 Pool Corporation are associated (or correlated) with Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of Pool i.e., Pool and Applied Industrial go up and down completely randomly.
Pair Corralation between Pool and Applied Industrial
Given the investment horizon of 90 days Pool is expected to generate 3.32 times less return on investment than Applied Industrial. But when comparing it to its historical volatility, Pool Corporation is 1.51 times less risky than Applied Industrial. It trades about 0.1 of its potential returns per unit of risk. Applied Industrial Technologies is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 23,508 in Applied Industrial Technologies on August 30, 2024 and sell it today you would earn a total of 3,882 from holding Applied Industrial Technologies or generate 16.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Pool Corp. vs. Applied Industrial Technologie
Performance |
| Timeline |
| Pool |
| Applied Industrial |
Pool and Applied Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and Applied Industrial
The main advantage of trading using opposite Pool and Applied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, Applied Industrial 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 Applied Industrial will offset losses from the drop in Applied Industrial's long position.The idea behind Pool Corporation and Applied Industrial Technologies 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.| Applied Industrial vs. Core Main | Applied Industrial vs. WW Grainger | Applied Industrial vs. DXP Enterprises | Applied Industrial vs. SiteOne Landscape Supply |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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