Correlation Between Sands Capital and Poplar Forest
Can any of the company-specific risk be diversified away by investing in both Sands Capital 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 Sands Capital and Poplar Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sands Capital Global and Poplar Forest Partners, you can compare the effects of market volatilities on Sands Capital 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 Sands Capital with a short position of Poplar Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sands Capital and Poplar Forest.
Diversification Opportunities for Sands Capital and Poplar Forest
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sands and Poplar is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sands Capital Global and Poplar Forest Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poplar Forest Partners and Sands Capital 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 Sands Capital Global 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 Partners has no effect on the direction of Sands Capital i.e., Sands Capital and Poplar Forest go up and down completely randomly.
Pair Corralation between Sands Capital and Poplar Forest
Assuming the 90 days horizon Sands Capital Global is expected to generate 1.15 times more return on investment than Poplar Forest. However, Sands Capital is 1.15 times more volatile than Poplar Forest Partners. It trades about 0.18 of its potential returns per unit of risk. Poplar Forest Partners is currently generating about 0.13 per unit of risk. If you would invest 3,107 in Sands Capital Global on August 30, 2024 and sell it today you would earn a total of 226.00 from holding Sands Capital Global or generate 7.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sands Capital Global vs. Poplar Forest Partners
Performance |
| Timeline |
| Sands Capital Global |
| Poplar Forest Partners |
Sands Capital and Poplar Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sands Capital and Poplar Forest
The main advantage of trading using opposite Sands Capital and Poplar Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sands Capital 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.| Sands Capital vs. Sands Capital Global | Sands Capital vs. Invesco Disciplined Equity | Sands Capital vs. Global Advantage Portfolio | Sands Capital vs. Global Opportunity Portfolio |
| Poplar Forest vs. Poplar Forest Partners | Poplar Forest vs. Columbia Select Large Cap | Poplar Forest vs. Prudential Qma Mid Cap | Poplar Forest vs. Columbia Select Large Cap |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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