Correlation Between Pool and ORACLE

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

By analyzing existing cross correlation between Pool Corporation and ORACLE P 38, you can compare the effects of market volatilities on Pool and ORACLE 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 ORACLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and ORACLE.

Diversification Opportunities for Pool and ORACLE

0.21

Correlation Coefficient

Pool  ORACLE

Modest diversification

The 3 months correlation between Pool and ORACLE is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and ORACLE P 38 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORACLE P 38 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 ORACLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORACLE P 38 has no effect on the direction of Pool i.e., Pool and ORACLE go up and down completely randomly.

Pair Corralation between Pool and ORACLE

Given the investment horizon of 90 days Pool Corporation is expected to under-perform the ORACLE. In addition to that, Pool is 1.73 times more volatile than ORACLE P 38. It trades about -0.07 of its total potential returns per unit of risk. ORACLE P 38 is currently generating about -0.02 per unit of volatility. If you would invest  8,358  in ORACLE P 38 on December 31, 2024 and sell it today you would lose (125.00) from holding ORACLE P 38 or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Pool Corp.  vs.  ORACLE P 38

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 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.

ORACLE P 38

Risk-Adjusted Performance

Weak

Over the last 90 days ORACLE P 38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ORACLE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pool and ORACLE

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

The idea behind Pool Corporation and ORACLE P 38 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.