Correlation Between LENSAR and Pool

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

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

Diversification Opportunities for LENSAR and Pool

-0.29

Correlation Coefficient

LENSAR  Pool

Very good diversification

The 3 months correlation between LENSAR and Pool is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool and LENSAR 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 LENSAR Inc 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 LENSAR i.e., LENSAR and Pool go up and down completely randomly.

Pair Corralation between LENSAR and Pool

Given the investment horizon of 90 days LENSAR Inc is expected to generate 2.42 times more return on investment than Pool. However, LENSAR is 2.42 times more volatile than Pool Corporation. It trades about 0.24 of its potential returns per unit of risk. Pool Corporation is currently generating about -0.11 per unit of risk. If you would invest  586.00  in LENSAR Inc on October 7, 2024 and sell it today you would earn a total of  279.00  from holding LENSAR Inc or generate 47.61% return on investment over 90 days.

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

LENSAR Inc  vs.  Pool Corp.

LENSAR Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pool

Risk-Adjusted Performance

0 of 100

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 LENSAR and Pool

The main advantage of trading using opposite LENSAR and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR 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 LENSAR Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.