Correlation Between Cornerstone Aggressive and Gmo Small

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

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

Diversification Opportunities for Cornerstone Aggressive and Gmo Small

0.74

Correlation Coefficient

Cornerstone Aggressive  Gmo Small

Poor diversification

The 3 months correlation between Cornerstone and Gmo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cornerstone Aggressive Fund and Gmo Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Small Cap and Cornerstone Aggressive 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 Aggressive Fund are associated (or correlated) with Gmo Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Small Cap has no effect on the direction of Cornerstone Aggressive i.e., Cornerstone Aggressive and Gmo Small go up and down completely randomly.

Pair Corralation between Cornerstone Aggressive and Gmo Small

Assuming the 90 days horizon Cornerstone Aggressive Fund is expected to under-perform the Gmo Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Cornerstone Aggressive Fund is 1.29 times less risky than Gmo Small. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Gmo Small Cap is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,612  in Gmo Small Cap on September 23, 2024 and sell it today you would lose (190.00) from holding Gmo Small Cap or give up 7.27% of portfolio value over 90 days.

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

Cornerstone Aggressive Fund  vs.  Gmo Small Cap

Cornerstone Aggressive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cornerstone Aggressive Fund 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.

Gmo Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cornerstone Aggressive and Gmo Small

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

The idea behind Cornerstone Aggressive Fund and Gmo Small Cap 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.