Correlation Between Pool and Mid Atlantic
Can any of the company-specific risk be diversified away by investing in both Pool and Mid Atlantic 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 Mid Atlantic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and Mid Atlantic Home Health, you can compare the effects of market volatilities on Pool and Mid Atlantic 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 Mid Atlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and Mid Atlantic.
Diversification Opportunities for Pool and Mid Atlantic
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Pool and Mid is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Mid Atlantic Home Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Atlantic Home 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 Mid Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Atlantic Home has no effect on the direction of Pool i.e., Pool and Mid Atlantic go up and down completely randomly.
Pair Corralation between Pool and Mid Atlantic
Given the investment horizon of 90 days Pool Corporation is expected to generate 0.4 times more return on investment than Mid Atlantic. However, Pool Corporation is 2.52 times less risky than Mid Atlantic. It trades about 0.03 of its potential returns per unit of risk. Mid Atlantic Home Health is currently generating about -0.06 per unit of risk. If you would invest 29,843 in Pool Corporation on September 14, 2024 and sell it today you would earn a total of 6,759 from holding Pool Corporation or generate 22.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Pool Corp. vs. Mid Atlantic Home Health
Performance |
| Timeline |
| Pool |
| Mid Atlantic Home |
Pool and Mid Atlantic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and Mid Atlantic
The main advantage of trading using opposite Pool and Mid Atlantic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, Mid Atlantic 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 Mid Atlantic will offset losses from the drop in Mid Atlantic's long position.The idea behind Pool Corporation and Mid Atlantic Home Health 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.| Mid Atlantic vs. Pennant Group | Mid Atlantic vs. Encompass Health Corp | Mid Atlantic vs. Enhabit | Mid Atlantic vs. Concord Medical Services |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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