Correlation Between Cornerstone Strategic and SP Midcap

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

By analyzing existing cross correlation between Cornerstone Strategic Value and SP Midcap 400, you can compare the effects of market volatilities on Cornerstone Strategic and SP Midcap 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 Strategic with a short position of SP Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cornerstone Strategic and SP Midcap.

Diversification Opportunities for Cornerstone Strategic and SP Midcap

0.87

Correlation Coefficient

Cornerstone Strategic  SP Midcap

Very poor diversification

The 3 months correlation between Cornerstone and MID is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cornerstone Strategic Value and SP Midcap 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Midcap 400 and Cornerstone Strategic 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 Strategic Value are associated (or correlated) with SP Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Midcap 400 has no effect on the direction of Cornerstone Strategic i.e., Cornerstone Strategic and SP Midcap go up and down completely randomly.

Pair Corralation between Cornerstone Strategic and SP Midcap

Considering the 90-day investment horizon Cornerstone Strategic is expected to generate 1.61 times less return on investment than SP Midcap. But when comparing it to its historical volatility, Cornerstone Strategic Value is 1.13 times less risky than SP Midcap. It trades about 0.09 of its potential returns per unit of risk. SP Midcap 400 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  313,953  in SP Midcap 400 on May 2, 2025 and sell it today you would earn a total of  6,701  from holding SP Midcap 400 or generate 2.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Cornerstone Strategic Value  vs.  SP Midcap 400

Pair Trading with Cornerstone Strategic and SP Midcap

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

The idea behind Cornerstone Strategic Value and SP Midcap 400 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 Global Correlations module to find global opportunities by holding instruments from different markets.