Correlation Between Pool and MSC Industrial
Can any of the company-specific risk be diversified away by investing in both Pool and MSC 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 MSC 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 MSC Industrial Direct, you can compare the effects of market volatilities on Pool and MSC 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 MSC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and MSC Industrial.
Diversification Opportunities for Pool and MSC Industrial
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pool and MSC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and MSC Industrial Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSC Industrial Direct 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 MSC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSC Industrial Direct has no effect on the direction of Pool i.e., Pool and MSC Industrial go up and down completely randomly.
Pair Corralation between Pool and MSC Industrial
Given the investment horizon of 90 days Pool is expected to generate 1.24 times less return on investment than MSC Industrial. In addition to that, Pool is 1.24 times more volatile than MSC Industrial Direct. It trades about 0.01 of its total potential returns per unit of risk. MSC Industrial Direct is currently generating about 0.01 per unit of volatility. If you would invest 7,846 in MSC Industrial Direct on November 19, 2024 and sell it today you would earn a total of 299.00 from holding MSC Industrial Direct or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pool Corp. vs. MSC Industrial Direct
Performance |
| Timeline |
| Pool |
| MSC Industrial Direct |
Pool and MSC Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and MSC Industrial
The main advantage of trading using opposite Pool and MSC Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, MSC 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 MSC Industrial will offset losses from the drop in MSC Industrial's long position.The idea behind Pool Corporation and MSC Industrial Direct 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.| MSC Industrial vs. DXP Enterprises | MSC Industrial vs. Core Main | MSC Industrial vs. WW Grainger | MSC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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