Correlation Between Ferguson Plc and Pool

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

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

Diversification Opportunities for Ferguson Plc and Pool

0.86

Correlation Coefficient

Ferguson Plc  Pool

Very poor diversification

The 3 months correlation between Ferguson and Pool is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool and Ferguson Plc 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 Ferguson Plc 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 Ferguson Plc i.e., Ferguson Plc and Pool go up and down completely randomly.

Pair Corralation between Ferguson Plc and Pool

Given the investment horizon of 90 days Ferguson Plc is expected to under-perform the Pool. In addition to that, Ferguson Plc is 1.51 times more volatile than Pool Corporation. It trades about -0.16 of its total potential returns per unit of risk. Pool Corporation is currently generating about -0.09 per unit of volatility. If you would invest  37,709  in Pool Corporation on November 28, 2024 and sell it today you would lose (2,837) from holding Pool Corporation or give up 7.52% of portfolio value over 90 days.

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

Ferguson Plc  vs.  Pool Corp.

Ferguson Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferguson Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 latest uncertain performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Ferguson Plc and Pool

The main advantage of trading using opposite Ferguson Plc and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferguson Plc 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 Ferguson Plc 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.