Correlation Between MSC Industrial and Pool

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

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

Diversification Opportunities for MSC Industrial and Pool

0.4

Correlation Coefficient

MSC Industrial  Pool

Very weak diversification

The 3 months correlation between MSC and Pool is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding MSC Industrial Direct and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool and MSC 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 MSC Industrial Direct 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 MSC Industrial i.e., MSC Industrial and Pool go up and down completely randomly.

Pair Corralation between MSC Industrial and Pool

Considering the 90-day investment horizon MSC Industrial Direct is expected to generate 1.08 times more return on investment than Pool. However, MSC Industrial is 1.08 times more volatile than Pool Corporation. It trades about 0.06 of its potential returns per unit of risk. Pool Corporation is currently generating about -0.06 per unit of risk. If you would invest  7,547  in MSC Industrial Direct on December 26, 2024 and sell it today you would earn a total of  439.00  from holding MSC Industrial Direct or generate 5.82% return on investment over 90 days.

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

MSC Industrial Direct  vs.  Pool Corp.

MSC Industrial Direct

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MSC Industrial Direct are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, MSC Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 MSC Industrial and Pool

The main advantage of trading using opposite MSC Industrial and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSC 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 MSC Industrial Direct 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.