Correlation Between Lowes Companies and Pool
Can any of the company-specific risk be diversified away by investing in both Lowes Companies 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 Lowes Companies and Pool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Pool Corporation, you can compare the effects of market volatilities on Lowes Companies 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 Lowes Companies with a short position of Pool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Pool.
Diversification Opportunities for Lowes Companies and Pool
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lowes and Pool is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool and Lowes Companies 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 Lowes Companies 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 Lowes Companies i.e., Lowes Companies and Pool go up and down completely randomly.
Pair Corralation between Lowes Companies and Pool
Considering the 90-day investment horizon Lowes Companies is expected to generate 0.8 times more return on investment than Pool. However, Lowes Companies is 1.26 times less risky than Pool. It trades about 0.12 of its potential returns per unit of risk. Pool Corporation is currently generating about -0.03 per unit of risk. If you would invest 21,055 in Lowes Companies on January 24, 2024 and sell it today you would earn a total of 2,068 from holding Lowes Companies or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. Pool Corp.
Performance |
| Timeline |
| Lowes Companies |
| Pool |
Lowes Companies and Pool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and Pool
The main advantage of trading using opposite Lowes Companies and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies 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.| Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Kirklands | Lowes Companies vs. Live Ventures |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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