Correlation Between United States and Pool
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Pool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Pool Corporation, you can compare the effects of market volatilities on United States 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 United States with a short position of Pool. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Pool.
Diversification Opportunities for United States and Pool
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Pool is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool and United States 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 United States Steel 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 United States i.e., United States and Pool go up and down completely randomly.
Pair Corralation between United States and Pool
Taking into account the 90-day investment horizon United States Steel is expected to generate 1.57 times more return on investment than Pool. However, United States is 1.57 times more volatile than Pool Corporation. It trades about 0.05 of its potential returns per unit of risk. Pool Corporation is currently generating about 0.02 per unit of risk. If you would invest 2,545 in United States Steel on September 3, 2024 and sell it today you would earn a total of 1,532 from holding United States Steel or generate 60.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Pool Corp.
Performance |
| Timeline |
| United States Steel |
| Pool |
United States and Pool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Pool
The main advantage of trading using opposite United States and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Nucor Corp | United States vs. Steel Dynamics | United States vs. ArcelorMittal SA ADR | United States vs. Gerdau SA ADR |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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