Correlation Between Continental and Pool

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

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

Diversification Opportunities for Continental and Pool

-0.11

Correlation Coefficient

Continental  Pool

Good diversification

The 3 months correlation between Continental and Pool is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool and Continental 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 Caleres 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 Continental i.e., Continental and Pool go up and down completely randomly.

Pair Corralation between Continental and Pool

Considering the 90-day investment horizon Caleres is expected to under-perform the Pool. In addition to that, Continental is 1.88 times more volatile than Pool Corporation. It trades about -0.1 of its total potential returns per unit of risk. Pool Corporation is currently generating about 0.04 per unit of volatility. If you would invest  35,728  in Pool Corporation on September 14, 2024 and sell it today you would earn a total of  1,226  from holding Pool Corporation or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Caleres  vs.  Pool Corp.

Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pool

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pool Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Pool is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Continental and Pool

The main advantage of trading using opposite Continental and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental 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 Caleres 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.