Correlation Between Pool and Canlan Ice

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

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

Diversification Opportunities for Pool and Canlan Ice

-0.73

Correlation Coefficient

Pool  Canlan Ice

Pay attention - limited upside

The 3 months correlation between Pool and Canlan is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports and Pool 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 Pool Corporation are associated (or correlated) with Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Pool i.e., Pool and Canlan Ice go up and down completely randomly.

Pair Corralation between Pool and Canlan Ice

Given the investment horizon of 90 days Pool is expected to generate 4.34 times less return on investment than Canlan Ice. In addition to that, Pool is 14.51 times more volatile than Canlan Ice Sports. It trades about 0.0 of its total potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.13 per unit of volatility. If you would invest  272.00  in Canlan Ice Sports on October 22, 2024 and sell it today you would earn a total of  25.00  from holding Canlan Ice Sports or generate 9.19% return on investment over 90 days.

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

Pool Corp.  vs.  Canlan Ice Sports

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.

Canlan Ice Sports

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pool and Canlan Ice

The main advantage of trading using opposite Pool and Canlan Ice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, Canlan Ice 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 Canlan Ice will offset losses from the drop in Canlan Ice's long position.

The idea behind Pool Corporation and Canlan Ice Sports 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 Anywhere module to track or share privately all of your investments from the convenience of any device.