Correlation Between Vanguard Financials and Cullen International
Can any of the company-specific risk be diversified away by investing in both Vanguard Financials and Cullen International 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 Vanguard Financials and Cullen International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Financials Index and Cullen International High, you can compare the effects of market volatilities on Vanguard Financials and Cullen International 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 Vanguard Financials with a short position of Cullen International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Cullen International.
Diversification Opportunities for Vanguard Financials and Cullen International
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Cullen is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Cullen International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen International High and Vanguard Financials 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 Vanguard Financials Index are associated (or correlated) with Cullen International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen International High has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Cullen International go up and down completely randomly.
Pair Corralation between Vanguard Financials and Cullen International
Assuming the 90 days horizon Vanguard Financials Index is expected to generate 1.39 times more return on investment than Cullen International. However, Vanguard Financials is 1.39 times more volatile than Cullen International High. It trades about 0.16 of its potential returns per unit of risk. Cullen International High is currently generating about 0.09 per unit of risk. If you would invest 4,179 in Vanguard Financials Index on September 14, 2024 and sell it today you would earn a total of 1,943 from holding Vanguard Financials Index or generate 46.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Financials Index vs. Cullen International High
Performance |
| Timeline |
| Vanguard Financials Index |
| Cullen International High |
Vanguard Financials and Cullen International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Financials and Cullen International
The main advantage of trading using opposite Vanguard Financials and Cullen International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials position performs unexpectedly, Cullen International 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 International will offset losses from the drop in Cullen International's long position.The idea behind Vanguard Financials Index and Cullen International High 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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