Correlation Between Poplar Forest and Aqr Large

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

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

Diversification Opportunities for Poplar Forest and Aqr Large

0.93

Correlation Coefficient

Poplar Forest  Aqr Large

Almost no diversification

The 3 months correlation between POPLAR and Aqr is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Poplar Forest Partners and Aqr Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Large Cap and Poplar Forest 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 Poplar Forest Partners are associated (or correlated) with Aqr Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Large Cap has no effect on the direction of Poplar Forest i.e., Poplar Forest and Aqr Large go up and down completely randomly.

Pair Corralation between Poplar Forest and Aqr Large

Assuming the 90 days horizon Poplar Forest Partners is expected to generate 1.3 times more return on investment than Aqr Large. However, Poplar Forest is 1.3 times more volatile than Aqr Large Cap. It trades about 0.12 of its potential returns per unit of risk. Aqr Large Cap is currently generating about 0.14 per unit of risk. If you would invest  5,367  in Poplar Forest Partners on September 3, 2024 and sell it today you would earn a total of  304.00  from holding Poplar Forest Partners or generate 5.66% return on investment over 90 days.

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

Poplar Forest Partners  vs.  Aqr Large Cap

Poplar Forest Partners

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Poplar Forest Partners are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Poplar Forest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Large Cap

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Poplar Forest and Aqr Large

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

The idea behind Poplar Forest Partners and Aqr Large Cap 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.