Correlation Between Pool and Willamette Valley
Can any of the company-specific risk be diversified away by investing in both Pool and Willamette Valley 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 Willamette Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and Willamette Valley Vineyards, you can compare the effects of market volatilities on Pool and Willamette Valley 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 Willamette Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and Willamette Valley.
Diversification Opportunities for Pool and Willamette Valley
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pool and Willamette is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Pool i.e., Pool and Willamette Valley go up and down completely randomly.
Pair Corralation between Pool and Willamette Valley
Given the investment horizon of 90 days Pool Corporation is expected to generate 1.82 times more return on investment than Willamette Valley. However, Pool is 1.82 times more volatile than Willamette Valley Vineyards. It trades about 0.1 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.16 per unit of risk. If you would invest 36,114 in Pool Corporation on August 30, 2024 and sell it today you would earn a total of 1,569 from holding Pool Corporation or generate 4.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pool Corp. vs. Willamette Valley Vineyards
Performance |
| Timeline |
| Pool |
| Willamette Valley |
Pool and Willamette Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and Willamette Valley
The main advantage of trading using opposite Pool and Willamette Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, Willamette Valley 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 Willamette Valley will offset losses from the drop in Willamette Valley's long position.The idea behind Pool Corporation and Willamette Valley Vineyards 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.| Willamette Valley vs. Andrew Peller Limited | Willamette Valley vs. Naked Wines plc | Willamette Valley vs. Willamette Valley Vineyards | Willamette Valley vs. The Tinley Beverage |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |