Correlation Between Cullen International and Cullen Small

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

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

Diversification Opportunities for Cullen International and Cullen Small

-0.47

Correlation Coefficient

Cullen International  Cullen Small

Very good diversification

The 3 months correlation between Cullen and Cullen is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cullen International High and Cullen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen Small Cap and Cullen International 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 International High are associated (or correlated) with Cullen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen Small Cap has no effect on the direction of Cullen International i.e., Cullen International and Cullen Small go up and down completely randomly.

Pair Corralation between Cullen International and Cullen Small

Assuming the 90 days horizon Cullen International High is expected to under-perform the Cullen Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Cullen International High is 2.21 times less risky than Cullen Small. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Cullen Small Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,534  in Cullen Small Cap on September 13, 2024 and sell it today you would earn a total of  62.00  from holding Cullen Small Cap or generate 4.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Cullen International High  vs.  Cullen Small Cap

Cullen International High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cullen International High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Cullen International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cullen Small Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cullen Small Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Cullen Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cullen International and Cullen Small

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

The idea behind Cullen International High and Cullen 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.