Correlation Between RH and Pool
Can any of the company-specific risk be diversified away by investing in both RH and Pool 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 RH and Pool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RH and Pool Corporation, you can compare the effects of market volatilities on RH and Pool 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 RH with a short position of Pool. Check out your portfolio center. Please also check ongoing floating volatility patterns of RH and Pool.
Diversification Opportunities for RH and Pool
Very good diversification
The 3 months correlation between RH and Pool is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding RH and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool and RH 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 RH are associated (or correlated) with Pool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pool has no effect on the direction of RH i.e., RH and Pool go up and down completely randomly.
Pair Corralation between RH and Pool
Allowing for the 90-day total investment horizon RH is expected to under-perform the Pool. In addition to that, RH is 1.87 times more volatile than Pool Corporation. It trades about -0.27 of its total potential returns per unit of risk. Pool Corporation is currently generating about -0.05 per unit of volatility. If you would invest 35,026 in Pool Corporation on November 18, 2024 and sell it today you would lose (598.00) from holding Pool Corporation or give up 1.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RH vs. Pool Corp.
Performance |
| Timeline |
| RH |
| Pool |
RH and Pool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RH and Pool
The main advantage of trading using opposite RH and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RH position performs unexpectedly, Pool 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 Pool will offset losses from the drop in Pool's long position.The idea behind RH and Pool Corporation 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.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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