Correlation Between Pool and Cyclo Therapeutics

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

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

Diversification Opportunities for Pool and Cyclo Therapeutics

0.19

Correlation Coefficient

Pool  Cyclo Therapeutics

Average diversification

The 3 months correlation between Pool and Cyclo is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Cyclo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclo Therapeutics 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 Cyclo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclo Therapeutics has no effect on the direction of Pool i.e., Pool and Cyclo Therapeutics go up and down completely randomly.

Pair Corralation between Pool and Cyclo Therapeutics

Given the investment horizon of 90 days Pool Corporation is expected to under-perform the Cyclo Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Pool Corporation is 9.51 times less risky than Cyclo Therapeutics. The stock trades about -0.14 of its potential returns per unit of risk. The Cyclo Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Cyclo Therapeutics on October 9, 2024 and sell it today you would lose (6.00) from holding Cyclo Therapeutics or give up 28.57% of portfolio value over 90 days.

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

Pool Corp.  vs.  Cyclo Therapeutics

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 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.

Cyclo Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cyclo Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical indicators, Cyclo Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pool and Cyclo Therapeutics

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

The idea behind Pool Corporation and Cyclo Therapeutics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.