Correlation Between Cullen High and The Value

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

By analyzing existing cross correlation between Cullen High Dividend and The Value Fund, you can compare the effects of market volatilities on Cullen High and The Value 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 Cullen High with a short position of The Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen High and The Value.

Diversification Opportunities for Cullen High and The Value

0.55

Correlation Coefficient

Cullen High  The Value

Very weak diversification

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

Pair Corralation between Cullen High and The Value

Assuming the 90 days horizon Cullen High is expected to generate 2.35 times less return on investment than The Value. But when comparing it to its historical volatility, Cullen High Dividend is 1.18 times less risky than The Value. It trades about 0.08 of its potential returns per unit of risk. The Value Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,393  in The Value Fund on August 31, 2024 and sell it today you would earn a total of  222.00  from holding The Value Fund or generate 6.54% return on investment over 90 days.

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

Cullen High Dividend  vs.  The Value Fund

Cullen High Dividend

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cullen High Dividend are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cullen High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Value Fund

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Value Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, The Value may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Cullen High and The Value

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

The idea behind Cullen High Dividend and The Value 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.