Correlation Between Pool and Flexible Solutions
Can any of the company-specific risk be diversified away by investing in both Pool and Flexible Solutions 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 Flexible Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and Flexible Solutions International, you can compare the effects of market volatilities on Pool and Flexible Solutions 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 Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and Flexible Solutions.
Diversification Opportunities for Pool and Flexible Solutions
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pool and Flexible is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Pool i.e., Pool and Flexible Solutions go up and down completely randomly.
Pair Corralation between Pool and Flexible Solutions
Given the investment horizon of 90 days Pool is expected to generate 1.72 times less return on investment than Flexible Solutions. But when comparing it to its historical volatility, Pool Corporation is 1.72 times less risky than Flexible Solutions. It trades about 0.03 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 287.00 in Flexible Solutions International on September 12, 2024 and sell it today you would earn a total of 93.00 from holding Flexible Solutions International or generate 32.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pool Corp. vs. Flexible Solutions Internation
Performance |
| Timeline |
| Pool |
| Flexible Solutions |
Pool and Flexible Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and Flexible Solutions
The main advantage of trading using opposite Pool and Flexible Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, Flexible Solutions 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 Flexible Solutions will offset losses from the drop in Flexible Solutions' long position.The idea behind Pool Corporation and Flexible Solutions International 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.| Flexible Solutions vs. Orion Engineered Carbons | Flexible Solutions vs. International Flavors Fragrances | Flexible Solutions vs. Sociedad Quimica y | Flexible Solutions vs. Albemarle Corp |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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