Correlation Between Cullen International and Dunham Corporate/govern
Can any of the company-specific risk be diversified away by investing in both Cullen International and Dunham Corporate/govern 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 Dunham Corporate/govern 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 Dunham Porategovernment Bond, you can compare the effects of market volatilities on Cullen International and Dunham Corporate/govern 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 Dunham Corporate/govern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen International and Dunham Corporate/govern.
Diversification Opportunities for Cullen International and Dunham Corporate/govern
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cullen and Dunham is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cullen International High and Dunham Porategovernment Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Porategovernment 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 Dunham Corporate/govern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Porategovernment has no effect on the direction of Cullen International i.e., Cullen International and Dunham Corporate/govern go up and down completely randomly.
Pair Corralation between Cullen International and Dunham Corporate/govern
Assuming the 90 days horizon Cullen International High is expected to generate 2.09 times more return on investment than Dunham Corporate/govern. However, Cullen International is 2.09 times more volatile than Dunham Porategovernment Bond. It trades about 0.05 of its potential returns per unit of risk. Dunham Porategovernment Bond is currently generating about 0.06 per unit of risk. If you would invest 960.00 in Cullen International High on September 2, 2024 and sell it today you would earn a total of 137.00 from holding Cullen International High or generate 14.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cullen International High vs. Dunham Porategovernment Bond
Performance |
| Timeline |
| Cullen International High |
| Dunham Porategovernment |
Cullen International and Dunham Corporate/govern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cullen International and Dunham Corporate/govern
The main advantage of trading using opposite Cullen International and Dunham Corporate/govern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cullen International position performs unexpectedly, Dunham Corporate/govern 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 Dunham Corporate/govern will offset losses from the drop in Dunham Corporate/govern's long position.The idea behind Cullen International High and Dunham Porategovernment Bond 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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