Correlation Between Mattel and Pool

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

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

Diversification Opportunities for Mattel and Pool

0.79

Correlation Coefficient

Mattel  Pool

Poor diversification

The 3 months correlation between Mattel and Pool is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool and Mattel 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 Mattel Inc 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 Mattel i.e., Mattel and Pool go up and down completely randomly.

Pair Corralation between Mattel and Pool

Considering the 90-day investment horizon Mattel Inc is expected to generate 0.98 times more return on investment than Pool. However, Mattel Inc is 1.02 times less risky than Pool. It trades about -0.22 of its potential returns per unit of risk. Pool Corporation is currently generating about -0.24 per unit of risk. If you would invest  1,968  in Mattel Inc on January 29, 2024 and sell it today you would lose (132.00) from holding Mattel Inc or give up 6.71% of portfolio value over 90 days.

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

Mattel Inc  vs.  Pool Corp.

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mattel and Pool

The main advantage of trading using opposite Mattel and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mattel 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.

The idea behind Mattel Inc and Pool Corporation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.