Correlation Between Cullen International and Cullen Emerging
Can any of the company-specific risk be diversified away by investing in both Cullen International and Cullen Emerging 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 Emerging 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 Emerging Markets, you can compare the effects of market volatilities on Cullen International and Cullen Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen International and Cullen Emerging.
Diversification Opportunities for Cullen International and Cullen Emerging
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cullen and Cullen is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cullen International High and Cullen Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen Emerging Markets 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 Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen Emerging Markets has no effect on the direction of Cullen International i.e., Cullen International and Cullen Emerging go up and down completely randomly.
Pair Corralation between Cullen International and Cullen Emerging
Assuming the 90 days horizon Cullen International High is expected to generate 1.09 times more return on investment than Cullen Emerging. However, Cullen International is 1.09 times more volatile than Cullen Emerging Markets. It trades about -0.11 of its potential returns per unit of risk. Cullen Emerging Markets is currently generating about -0.19 per unit of risk. If you would invest 1,131 in Cullen International High on August 30, 2024 and sell it today you would lose (18.00) from holding Cullen International High or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cullen International High vs. Cullen Emerging Markets
Performance |
| Timeline |
| Cullen International High |
| Cullen Emerging Markets |
Cullen International and Cullen Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cullen International and Cullen Emerging
The main advantage of trading using opposite Cullen International and Cullen Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cullen International position performs unexpectedly, Cullen Emerging 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 Emerging will offset losses from the drop in Cullen Emerging's long position.The idea behind Cullen International High and Cullen Emerging Markets 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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