Correlation Between William Blair and Poplar Forest

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

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

Diversification Opportunities for William Blair and Poplar Forest

-0.28

Correlation Coefficient

William Blair  Poplar Forest

Very good diversification

The 3 months correlation between William and Poplar is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding William Blair Large 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 William Blair 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 William Blair Large 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 William Blair i.e., William Blair and Poplar Forest go up and down completely randomly.

Pair Corralation between William Blair and Poplar Forest

Assuming the 90 days horizon William Blair Large is expected to under-perform the Poplar Forest. In addition to that, William Blair is 2.57 times more volatile than Poplar Forest Nerstone. It trades about -0.13 of its total potential returns per unit of risk. Poplar Forest Nerstone is currently generating about 0.12 per unit of volatility. If you would invest  2,793  in Poplar Forest Nerstone on December 29, 2024 and sell it today you would earn a total of  111.00  from holding Poplar Forest Nerstone or generate 3.97% return on investment over 90 days.

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

William Blair Large  vs.  Poplar Forest Nerstone

William Blair Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days William Blair Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Poplar Forest Nerstone

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Poplar Forest Nerstone are ranked lower than 9 (%) 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 William Blair and Poplar Forest

The main advantage of trading using opposite William Blair and Poplar Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if William Blair 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 William Blair Large 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.