Correlation Between Income Fund and Poplar Forest

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

By analyzing existing cross correlation between Income Fund Of and Poplar Forest Nerstone, you can compare the effects of market volatilities on Income Fund and Poplar Forest 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 Income Fund with a short position of Poplar Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and Poplar Forest.

Diversification Opportunities for Income Fund and Poplar Forest

0.78

Correlation Coefficient

Income Fund  Poplar Forest

Poor diversification

The 3 months correlation between Income and POPLAR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and Poplar Forest Nerstone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poplar Forest Nerstone and Income Fund 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 Income Fund Of are associated (or correlated) with Poplar Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poplar Forest Nerstone has no effect on the direction of Income Fund i.e., Income Fund and Poplar Forest go up and down completely randomly.

Pair Corralation between Income Fund and Poplar Forest

Assuming the 90 days horizon Income Fund is expected to generate 1.11 times less return on investment than Poplar Forest. But when comparing it to its historical volatility, Income Fund Of is 1.23 times less risky than Poplar Forest. It trades about 0.15 of its potential returns per unit of risk. Poplar Forest Nerstone is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,008  in Poplar Forest Nerstone on September 2, 2024 and sell it today you would earn a total of  126.00  from holding Poplar Forest Nerstone or generate 4.19% return on investment over 90 days.

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

Income Fund Of  vs.  Poplar Forest Nerstone

Income Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Income Fund Of are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Income Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Poplar Forest Nerstone

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Poplar Forest Nerstone are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Poplar Forest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Income Fund and Poplar Forest

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

The idea behind Income Fund Of and Poplar Forest Nerstone 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.