Correlation Between Cullen Small and Cullen Enhanced
Can any of the company-specific risk be diversified away by investing in both Cullen Small and Cullen Enhanced 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 Small and Cullen Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cullen Small Cap and Cullen Enhanced Equity, you can compare the effects of market volatilities on Cullen Small and Cullen Enhanced 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 Small with a short position of Cullen Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen Small and Cullen Enhanced.
Diversification Opportunities for Cullen Small and Cullen Enhanced
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cullen and Cullen is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cullen Small Cap and Cullen Enhanced Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen Enhanced Equity and Cullen Small 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 Small Cap are associated (or correlated) with Cullen Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen Enhanced Equity has no effect on the direction of Cullen Small i.e., Cullen Small and Cullen Enhanced go up and down completely randomly.
Pair Corralation between Cullen Small and Cullen Enhanced
Assuming the 90 days horizon Cullen Small Cap is expected to generate 3.2 times more return on investment than Cullen Enhanced. However, Cullen Small is 3.2 times more volatile than Cullen Enhanced Equity. It trades about 0.18 of its potential returns per unit of risk. Cullen Enhanced Equity is currently generating about 0.18 per unit of risk. If you would invest 1,545 in Cullen Small Cap on August 26, 2024 and sell it today you would earn a total of 113.00 from holding Cullen Small Cap or generate 7.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cullen Small Cap vs. Cullen Enhanced Equity
Performance |
| Timeline |
| Cullen Small Cap |
| Cullen Enhanced Equity |
Cullen Small and Cullen Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cullen Small and Cullen Enhanced
The main advantage of trading using opposite Cullen Small and Cullen Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cullen Small position performs unexpectedly, Cullen Enhanced 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 Enhanced will offset losses from the drop in Cullen Enhanced's long position.| Cullen Small vs. Cullen Small Cap | Cullen Small vs. Cullen Emerging Markets | Cullen Small vs. Cullen Emerging Markets | Cullen Small vs. Cullen Enhanced Equity |
| Cullen Enhanced vs. Cullen Small Cap | Cullen Enhanced vs. Cullen Small Cap | Cullen Enhanced vs. Cullen Small Cap | Cullen Enhanced vs. Cullen Value Fund |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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