Correlation Between Capital Growth and Cornerstone Moderate

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

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

Diversification Opportunities for Capital Growth and Cornerstone Moderate

0.84

Correlation Coefficient

Capital Growth  Cornerstone Moderate

Very poor diversification

The 3 months correlation between Capital and Cornerstone is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and Cornerstone Moderate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornerstone Moderate and Capital Growth 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 Capital Growth Fund 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 Capital Growth i.e., Capital Growth and Cornerstone Moderate go up and down completely randomly.

Pair Corralation between Capital Growth and Cornerstone Moderate

Assuming the 90 days horizon Capital Growth Fund is expected to under-perform the Cornerstone Moderate. In addition to that, Capital Growth is 1.74 times more volatile than Cornerstone Moderate Fund. It trades about -0.02 of its total potential returns per unit of risk. Cornerstone Moderate Fund is currently generating about 0.03 per unit of volatility. If you would invest  1,502  in Cornerstone Moderate Fund on December 24, 2024 and sell it today you would earn a total of  13.00  from holding Cornerstone Moderate Fund or generate 0.87% return on investment over 90 days.

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

Capital Growth Fund  vs.  Cornerstone Moderate Fund

Capital Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Capital Growth 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

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cornerstone Moderate Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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 Capital Growth and Cornerstone Moderate

The main advantage of trading using opposite Capital Growth and Cornerstone Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth 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 Capital Growth Fund 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.