Correlation Between Cornerstone Conservative and Cornerstone Aggressive

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

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

Diversification Opportunities for Cornerstone Conservative and Cornerstone Aggressive

0.55

Correlation Coefficient

Cornerstone Conservative  Cornerstone Aggressive

Very weak diversification

The 3 months correlation between Cornerstone and Cornerstone is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cornerstone Servative Fund and Cornerstone Aggressive Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornerstone Aggressive and Cornerstone Conservative 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 Cornerstone Servative Fund are associated (or correlated) with Cornerstone Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornerstone Aggressive has no effect on the direction of Cornerstone Conservative i.e., Cornerstone Conservative and Cornerstone Aggressive go up and down completely randomly.

Pair Corralation between Cornerstone Conservative and Cornerstone Aggressive

Assuming the 90 days horizon Cornerstone Servative Fund is expected to generate 0.36 times more return on investment than Cornerstone Aggressive. However, Cornerstone Servative Fund is 2.78 times less risky than Cornerstone Aggressive. It trades about 0.12 of its potential returns per unit of risk. Cornerstone Aggressive Fund is currently generating about 0.02 per unit of risk. If you would invest  1,057  in Cornerstone Servative Fund on December 26, 2024 and sell it today you would earn a total of  20.00  from holding Cornerstone Servative Fund or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Cornerstone Servative Fund  vs.  Cornerstone Aggressive Fund

Cornerstone Conservative

Risk-Adjusted Performance

Good

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

Cornerstone Aggressive

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cornerstone Aggressive Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cornerstone Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cornerstone Conservative and Cornerstone Aggressive

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

The idea behind Cornerstone Servative Fund and Cornerstone Aggressive 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.