Correlation Between Pool and Newell Brands

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

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

Diversification Opportunities for Pool and Newell Brands

-0.17

Correlation Coefficient

Pool  Newell Brands

Good diversification

The 3 months correlation between Pool and Newell is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 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 Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of Pool i.e., Pool and Newell Brands go up and down completely randomly.

Pair Corralation between Pool and Newell Brands

Given the investment horizon of 90 days Pool Corporation is expected to generate 0.56 times more return on investment than Newell Brands. However, Pool Corporation is 1.78 times less risky than Newell Brands. It trades about 0.01 of its potential returns per unit of risk. Newell Brands is currently generating about -0.04 per unit of risk. If you would invest  36,192  in Pool Corporation on January 18, 2024 and sell it today you would earn a total of  223.00  from holding Pool Corporation or generate 0.62% return on investment over 90 days.

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

Pool Corp.  vs.  Newell Brands

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.

Newell Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newell Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Pool and Newell Brands

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

The idea behind Pool Corporation and Newell Brands 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.