Correlation Between Pool and MACOM Technology

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

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

Diversification Opportunities for Pool and MACOM Technology

0.27

Correlation Coefficient

Pool  MACOM Technology

Modest diversification

The 3 months correlation between Pool and MACOM is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol 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 MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of Pool i.e., Pool and MACOM Technology go up and down completely randomly.

Pair Corralation between Pool and MACOM Technology

Given the investment horizon of 90 days Pool Corporation is expected to generate 0.46 times more return on investment than MACOM Technology. However, Pool Corporation is 2.15 times less risky than MACOM Technology. It trades about -0.05 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about -0.11 per unit of risk. If you would invest  34,389  in Pool Corporation on December 27, 2024 and sell it today you would lose (1,971) from holding Pool Corporation or give up 5.73% of portfolio value over 90 days.

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

Pool Corp.  vs.  MACOM Technology Solutions

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.

MACOM Technology Sol

Risk-Adjusted Performance

Very Weak

Over the last 90 days MACOM Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Pool and MACOM Technology

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

The idea behind Pool Corporation and MACOM Technology Solutions 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.