Correlation Between The Arbitrage and Cullen High

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Can any of the company-specific risk be diversified away by investing in both The Arbitrage and Cullen High 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 The Arbitrage and Cullen High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Arbitrage Event Driven and Cullen High Dividend, you can compare the effects of market volatilities on The Arbitrage and Cullen High 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 The Arbitrage with a short position of Cullen High. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Arbitrage and Cullen High.

Diversification Opportunities for The Arbitrage and Cullen High

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between The and Cullen is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Event Driven and Cullen High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen High Dividend and The Arbitrage 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 The Arbitrage Event Driven are associated (or correlated) with Cullen High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen High Dividend has no effect on the direction of The Arbitrage i.e., The Arbitrage and Cullen High go up and down completely randomly.

Pair Corralation between The Arbitrage and Cullen High

Assuming the 90 days horizon The Arbitrage is expected to generate 2.28 times less return on investment than Cullen High. But when comparing it to its historical volatility, The Arbitrage Event Driven is 2.96 times less risky than Cullen High. It trades about 0.07 of its potential returns per unit of risk. Cullen High Dividend is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,278  in Cullen High Dividend on September 6, 2024 and sell it today you would earn a total of  227.00  from holding Cullen High Dividend or generate 17.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Arbitrage Event Driven  vs.  Cullen High Dividend

 Performance 
       Timeline  
Arbitrage Event 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Event Driven are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, The Arbitrage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Cullen High Dividend 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Cullen High Dividend are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cullen High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

The Arbitrage and Cullen High Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with The Arbitrage and Cullen High

The main advantage of trading using opposite The Arbitrage and Cullen High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Arbitrage position performs unexpectedly, Cullen High 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 High will offset losses from the drop in Cullen High's long position.
The idea behind The Arbitrage Event Driven and Cullen High Dividend 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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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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