Correlation Between Global Managed and Cornerstone Moderate

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

By analyzing existing cross correlation between Global Managed Volatility and Cornerstone Moderate Fund, you can compare the effects of market volatilities on Global Managed and Cornerstone Moderate 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 Global Managed with a short position of Cornerstone Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Managed and Cornerstone Moderate.

Diversification Opportunities for Global Managed and Cornerstone Moderate

0.96

Correlation Coefficient

Global Managed  Cornerstone Moderate

Almost no diversification

The 3 months correlation between Global and Cornerstone is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Global Managed Volatility and Cornerstone Moderate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornerstone Moderate and Global Managed 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 Global Managed Volatility are associated (or correlated) with Cornerstone Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornerstone Moderate has no effect on the direction of Global Managed i.e., Global Managed and Cornerstone Moderate go up and down completely randomly.

Pair Corralation between Global Managed and Cornerstone Moderate

Assuming the 90 days horizon Global Managed Volatility is expected to generate 1.13 times more return on investment than Cornerstone Moderate. However, Global Managed is 1.13 times more volatile than Cornerstone Moderate Fund. It trades about -0.04 of its potential returns per unit of risk. Cornerstone Moderate Fund is currently generating about -0.1 per unit of risk. If you would invest  1,115  in Global Managed Volatility on October 23, 2024 and sell it today you would lose (19.00) from holding Global Managed Volatility or give up 1.7% of portfolio value over 90 days.

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

Global Managed Volatility  vs.  Cornerstone Moderate Fund

Global Managed Volatility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Managed Volatility has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Global Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cornerstone Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cornerstone Moderate Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Cornerstone Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Managed and Cornerstone Moderate

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

The idea behind Global Managed Volatility and Cornerstone Moderate Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.