Correlation Between Applied Industrial and Pool

Can any of the company-specific risk be diversified away by investing in both Applied Industrial 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 Applied Industrial and Pool into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applied Industrial Technologies and Pool Corporation, you can compare the effects of market volatilities on Applied Industrial 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 Applied Industrial with a short position of Pool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Industrial and Pool.

Diversification Opportunities for Applied Industrial and Pool

0.32

Correlation Coefficient

Applied Industrial  Pool

Weak diversification

The 3 months correlation between Applied and Pool is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Applied Industrial Technologie and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool and Applied Industrial 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 Applied Industrial Technologies 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 Applied Industrial i.e., Applied Industrial and Pool go up and down completely randomly.

Pair Corralation between Applied Industrial and Pool

Considering the 90-day investment horizon Applied Industrial Technologies is expected to generate 1.2 times more return on investment than Pool. However, Applied Industrial is 1.2 times more volatile than Pool Corporation. It trades about -0.01 of its potential returns per unit of risk. Pool Corporation is currently generating about -0.04 per unit of risk. If you would invest  23,824  in Applied Industrial Technologies on December 28, 2024 and sell it today you would lose (602.00) from holding Applied Industrial Technologies or give up 2.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Applied Industrial Technologie  vs.  Pool Corp.

Applied Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Industrial Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Applied Industrial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pool

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pool Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Pool is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Applied Industrial and Pool

The main advantage of trading using opposite Applied Industrial and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Industrial 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 Applied Industrial Technologies 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.