Correlation Between Pool and Virco Manufacturing
Can any of the company-specific risk be diversified away by investing in both Pool and Virco Manufacturing 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 Virco Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and Virco Manufacturing, you can compare the effects of market volatilities on Pool and Virco Manufacturing 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 Virco Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and Virco Manufacturing.
Diversification Opportunities for Pool and Virco Manufacturing
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Pool and Virco is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing 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 Virco Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virco Manufacturing has no effect on the direction of Pool i.e., Pool and Virco Manufacturing go up and down completely randomly.
Pair Corralation between Pool and Virco Manufacturing
Given the investment horizon of 90 days Pool is expected to generate 4.03 times less return on investment than Virco Manufacturing. But when comparing it to its historical volatility, Pool Corporation is 1.83 times less risky than Virco Manufacturing. It trades about 0.09 of its potential returns per unit of risk. Virco Manufacturing is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,406 in Virco Manufacturing on August 31, 2024 and sell it today you would earn a total of 230.00 from holding Virco Manufacturing or generate 16.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pool Corp. vs. Virco Manufacturing
Performance |
| Timeline |
| Pool |
| Virco Manufacturing |
Pool and Virco Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and Virco Manufacturing
The main advantage of trading using opposite Pool and Virco Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, Virco Manufacturing 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 Virco Manufacturing will offset losses from the drop in Virco Manufacturing's long position.The idea behind Pool Corporation and Virco Manufacturing 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.| Virco Manufacturing vs. Bassett Furniture Industries | Virco Manufacturing vs. Hooker Furniture | Virco Manufacturing vs. Natuzzi SpA | Virco Manufacturing vs. Flexsteel Industries |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |